211 9,8 211 190 · 2020-08-07 · 183 Auditor’s report 184 Report of the Supervisory Board 190 Boards ... 98 Consolidated segment reporting 100 Notes (see detailed register on page

211 9,8 211 190Fr

esen

ius

SE

& C

o. K

GaA

· A

nnua

l Rep

ort

2014

ANNUAL REPORT

2 To our shareholders

6 Summary of the fiscal year

8 Fresenius share

11 Corporate governance declaration

and report

36 Business segments

36 Fresenius Medical Care

38 Fresenius Kabi

40 Fresenius Helios

42 Fresenius Vamed

44 Management report

(see detailed register on page 44)

45 Fundamental information about

the Group

45 The Group’s business model

48 Goals and strategy

49 Corporate performance

criteria

50 Research and development

52 Employees

53 Procurement

54 Quality management

55 Responsibility, environmental

management, sustainability

58 Report on economic position

58 Health care industry

62 Overall business development

64 Results of operations, financial

position, assets and liabilities

76 Subsequent events

76 Overall assessment of the

business situation

76 Outlook

76 General and mid-term

outlook

78 Future markets

78 Health care sector and

markets

80 Group sales and earnings

80 Sales and earnings by

business segment

81 Financing

81 Investments

82 Procurement


82 Planned changes in

human resources and

the social area

82 Dividend

83 Opportunities and risk report

83 Opportunities management

83 Risk management

84 Risk areas

91 Assessment of overall risk

92 Consolidated financial statements

93 Consolidated statement of income

93 Consolidated statement of

comprehensive income


financial position

95 Consolidated statement of cash flows


changes in equity

98 Consolidated segment reporting

100 Notes


101 General notes

118 Notes on the consolidated

statement of income


statement of financial position

152 Other notes

180 Notes in accordance with the

German Commercial Code

(HGB)

183 Auditor’s report

184 Report of the Supervisory Board

190 Boards

190 Supervisory Board

Fresenius SE & Co. KGaA

192 Management Board

Fresenius Management SE



194 Glossary

197 Index

TABLE OF CONTENTS

2014

211 9,8 211 190

Fres

eniu

s S

E &

Co

. KG

aA ·

Ann

ual R

epor

t 20

14

ANNUAL REPORT

2 To our shareholders

6 Summary of the fiscal year

8 Fresenius share

11 Corporate governance declaration

and report

36 Business segments

36 Fresenius Medical Care

38 Fresenius Kabi

40 Fresenius Helios

42 Fresenius Vamed

44 Management report


45 Fundamental information about

the Group



49 Corporate performance

criteria


52 Employees

53 Procurement


55 Responsibility, environmental

management, sustainability




64 Results of operations, financial

position, assets and liabilities


76 Overall assessment of the

business situation

76 Outlook

76 General and mid-term

outlook

78 Future markets

78 Health care sector and

markets


80 Sales and earnings by

business segment

81 Financing

81 Investments

82 Procurement


82 Planned changes in

human resources and

the social area

82 Dividend



83 Risk management

84 Risk areas


92 Consolidated financial statements



comprehensive income


financial position



changes in equity


100 Notes


101 General notes


statement of income


statement of financial position

152 Other notes

180 Notes in accordance with the

German Commercial Code

(HGB)

183 Auditor’s report

184 Report of the Supervisory Board

190 Boards



192 Management Board




194 Glossary

197 Index

TABLE OF CONTENTS

2014

190 211 9,8 211

FRESENIUS MEDICAL CARE

FRESENIUS HELIOS

FRESENIUS KABI

FRESENIUS VAMED

DIALYSIS PRODUCTS,

HEALTH CARE SERVICES

(DIALYSIS SERVICES

AND CARE COORDINATION)

HOSPITAL OPERATION

IV DRUGS, CLINICAL NUTRITION,

INFUSION THERAPY, MEDICAL DEVICES /

TRANSFUSION TECHNOLOGY

PROjECTS AND SERVICES

FOR HOSPITALS AND

OTHER HEALTH CARE FACILITIES

1 Before special items2 Net income attributable to the parent company of the respective business segment

For a detailed overview of 2013 – 2014 special items please see the reconciliation table on page 66.

2014US$ in millions

2013US$ in millions Change

2014€ in millions

2013€ in millions Change

Sales 15,832 14,610 8% 5,146 4,996 3%

EBIT 2,255 2,256 0% 873 1 926 1 - 6%

Net income 2 1,045 1,110 - 6% 468 1 487 1 - 4%

Operating cash flow 1,861 2,035 - 9% 641 488 31%

Capital expenditure / acquisitions 2,919 1,311 123% 479 448 7%

R & D expenses 122 126 - 3% 276 1 250 1 10%

Employees (December 31) 105,917 95,637 11% 32,899 31,961 3%

2014€ in millions


2014€ in millions


Sales 5,244 3,393 55% 1,042 1,020 2%

EBIT 553 1 390 42% 59 55 7%

Net income 2 400 1 275 45% 41 37 11%

Operating cash flow 558 258 116% - 9 31 - 129%

Capital expenditure /acquisitions 1,090 2,357 - 54% 22 27 - 19%

Order intake n / a n / a 840 744 13%


Key

fig

ures

of

the

busi

ness

seg

men

ts

<

FINANCIAL CALENDAR

Report on 1st quarter 2015 Conference call, live webcast April 30, 2015

Annual General Meeting, Frankfurt am Main, Germany May 20, 2015

Payment of dividend 1 May 21, 2015

Report on 2nd quarter 2015 Conference call, live webcast july 30, 2015

Report on 3rd quarter 2015 Conference call, live webcast October 29, 2015

1 Subject to prior approval by the Annual General Meeting

FRESENIUS GROUP IN FIGURES (U.S. GAAP)

€ in millions 2014 2013 2012 2011 2010

Sales and Earnings

Sales 23,231 20,331 19,290 16,361 1 15,972

EBITDA 2 4,095 3,888 3,851 3,237 3,057

EBIT 2 3,158 3,045 3,075 2,563 2,418

Net income (before special items) 3 1,086 1,051 938 770 660

Depreciation and amortization 937 843 776 674 639

Earnings per share in € (before special items) 3 2.01 1.96 4 1.81 4 1.58 4 1.36 4

Cash flow and Balance sheet

Operating cash flow 2,585 2,320 2,438 1,689 1,911

Operating cash flow in % of sales 11.1% 11.4% 12.6% 10.3% 12.0%

Total assets 39,897 32,758 30,664 26,321 23,577

Non-current assets 29,869 24,786 22,551 19,170 17,142

Equity 5 15,483 13,260 12,758 10,577 8,844

Equity ratio 5 39% 41% 42% 40% 38%

Net debt 14,279 11,940 10,143 9,164 8,015

Net debt / EBITDA 6 3.41 2.51 2.56 2.83 2.62

Investments 7 3,795 3,827 4,179 2,395 1,402

Profitability

EBIT margin 2 13.6% 15.0% 15.9% 15.7% 15.1%

Return on equity after taxes (ROE) 3 11.6% 12.8% 12.3% 12.9% 13.3%

Return on operating assets (ROOA) 6 9.1% 10.6% 11.0% 10.9% 11.6%

Return on invested capital (ROIC) 6 7.5% 8.8% 9.0% 8.8% 8.9%

Dividend per share in € 0.44 8 0.42 4 0.37 4 0.32 4 0.29 4

Employees (December 31) 216,275 178,337 169,324 149,351 137,552

1 2011 sales were adjusted by - € 161 million according to a U.S. GAAP accounting change; this solely relates to Fresenius Medical Care North America.2 2013 – 2014 before special items; 2012 before one-time costs (€ 6 million) related to the offer to the shareholders of Rhön-Klinikum AG

as well as other one-time costs (€ 86 million) at Fresenius Medical Care3 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2013 – 2014 before special items; 2012 before a non-taxable

investment gain (€ 34 million) and other one-time costs (€ 17 million) at Fresenius Medical Care as well as one-time costs (€ 29 million) related to the offer to the shareholders of Rhön-Klinikum AG; 2010 – 2011 before the effects of the mark-to-market accounting of the MEB and the CVR

4 Adjusted for 1 : 3 share split5 Including noncontrolling interest6 2012 – 2014 before special items; 2014 pro forma acquisitions; 2013 pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary

agreement for the acquisition of hospitals and outpatient facilities of Rhön-Klinikum AG and before integration costs of Fenwal (€ 54 million); 2012 pro forma acquisitions

7 Investments in property, plant and equipment, and intangible assets, acquisitions8 Proposal

You will find a 10-year overview on our website: www.fresenius.com under “Investor Relations.”

FRESENIUS SHARE / ADR

CONTACT

Ordinary share ADR

Securities identification no. 578 560 CUSIP 35804M105

Ticker symbol FRE Ticker symbol FSNUY

ISIN DE0005785604 ISIN US35804M1053

Bloomberg symbol FRE GR Structure Sponsored Level 1 ADR

Reuters symbol FREG.de Ratio 4 ADR = 1 share 1

Main trading location Frankfurt / Xetra Trading platform OTCQX

1 As of August 4, 2014, the ADR ratio was changed in conjunction with the company’s stock split (previous ratio: 8 ADR = 1 share).

Corporate HeadquartersElse-Kröner-Straße 1Bad Homburg v. d. H.Germany

Postal addressFresenius SE & Co. KGaA

61346 Bad Homburg v. d. H.Germany

Contact for shareholdersInvestor RelationsTelephone: ++ 49 61 72 6 08-26 37Telefax: ++ 49 61 72 6 08-24 88E-mail: [email protected]

Contact for journalistsCorporate CommunicationsTelephone: ++ 49 61 72 6 08-23 02Telefax: ++ 49 61 72 6 08-22 94E-mail: [email protected]

190 211 9,8 211


FRESENIUS HELIOS

FRESENIUS KABI

FRESENIUS VAMED

DIALYSIS PRODUCTS,


(DIALYSIS SERVICES


HOSPITAL OPERATION





FOR HOSPITALS AND




2014US$ in millions


2014€ in millions


Sales 15,832 14,610 8% 5,146 4,996 3%

EBIT 2,255 2,256 0% 873 1 926 1 - 6%

Net income 2 1,045 1,110 - 6% 468 1 487 1 - 4%



R & D expenses 122 126 - 3% 276 1 250 1 10%


2014€ in millions


2014€ in millions


Sales 5,244 3,393 55% 1,042 1,020 2%

EBIT 553 1 390 42% 59 55 7%

Net income 2 400 1 275 45% 41 37 11%





Key

fig

ures

of

the

busi

ness

seg

men

ts

<

FINANCIAL CALENDAR








€ in millions 2014 2013 2012 2011 2010

Sales and Earnings

Sales 23,231 20,331 19,290 16,361 1 15,972

EBITDA 2 4,095 3,888 3,851 3,237 3,057

EBIT 2 3,158 3,045 3,075 2,563 2,418







Total assets 39,897 32,758 30,664 26,321 23,577


Equity 5 15,483 13,260 12,758 10,577 8,844

Equity ratio 5 39% 41% 42% 40% 38%

Net debt 14,279 11,940 10,143 9,164 8,015

Net debt / EBITDA 6 3.41 2.51 2.56 2.83 2.62

Investments 7 3,795 3,827 4,179 2,395 1,402

Profitability

EBIT margin 2 13.6% 15.0% 15.9% 15.7% 15.1%














CONTACT

Ordinary share ADR



ISIN DE0005785604 ISIN US35804M1053










Fresenius is a global health care group providing products and services for dialysis,

hospitals, and outpatient medical care. In addition, Fresenius focuses on hospital

operations. We also manage projects and provide services for hospitals and other health

care facilities. More than 216,000 employees have dedicated themselves to the service

of health in about 100 countries worldwide.

To Our S

hareholders

To Our Shareholders2

Dear Fresenius Investor:

At Fresenius, growth means more than increasing sales and

profits. It is a commitment to improving our business and

strengthening our connection to patients each and every day.

Last May, I experienced this commitment first-hand. Shortly

after our acquisition of 41 hospitals from Rhön-Klinikum,

hospital managers, medical directors and care personnel from

both the existing and newly acquired HELIOS hospitals met

for the first time. There was a great deal of energy and enthu-

siasm among the attendees at the conference, with everyone

eager to learn from each other’s successes and past mistakes.

This spirit fostered lively discussions about how to further

improve patient care in all of our hospitals. We debated how

to combine exceptional treatment with efficiency, and dis-

cussed ways to increase the transparency of medical quality

reports.

In one of the many memorable discussions, the medical

director and chief physician of a newly acquired Rhön-Klinikum

hospital described the procedures and capabilities of its

renowned interdisciplinary emergency room. The facility is

so well managed and tailored to meet patient needs that

other HELIOS hospitals are now considering adopting the best

practices he shared with us. The session proved to me that

the conference would achieve its purpose: making the hospi-

tals “Better Together.”

The open and frank discussions we had that day in Berlin and

our professionals’ desire to learn from others reminded me

why Fresenius is uniquely positioned to deliver world-class

healthcare more effectively and efficiently than ever.

Getting closer to patientsAfter two decades of steady investment in our strategy, we

have transformed Fresenius from a pure product supplier

into an integrated care company. The growth of our services

businesses best illustrates our progress: during the last

10 years, sales revenue from services has more than tripled

from 4.5 billion euros to 15.5 billion euros, and increased as

a percentage of total sales to nearly 70 percent. We expect

those numbers to continue to grow.

To O

ur S

hare

hold

ers

To Our Shareholders 3

Last year was no exception. We achieved our growth objec-

tives once again and got even closer to our patients.

Our acquisition of the Rhön-Klinikum hospitals was a major

step in our transformation: today, a HELIOS facility is within

an hour of nearly every person in Germany. This extensive

healthcare platform enables us to develop innovative, compre-

hensive care offerings and deliver them efficiently. HELIOS

was a founding partner in a new venture launched last year,

called Kliniknetzwerk für Qualitätsmedizin, a hospital network.

This is open to all German hospitals that maintain clearly

defined standards of care. Our initiative is to offer additional

hospital services in cooperation with an insurer. Companies

can then provide this benefit to their employees, giving them

access to a level of service not covered by standard public

health insurance.

» We remain committed to our ›Closer to Patients‹ strategy. «

By bundling expertise in specialist centers, we will be better

positioned to address patients’ unique needs. Outpatient,

acute and rehabilitative care will be better integrated to avoid

redundant examinations and reduce wait times. We see the

hospital network as an innovative partnership model for the

future of German healthcare, with patients as the greatest

beneficiaries. We think our efforts will mark the beginning of

more efficient, more closely coordinated healthcare – a win-

win for patients and providers.

More than just dialysis Fresenius Medical Care is also moving closer to patients

through its newly created Care Coordination business. Our goal

is to integrate specialists into coordinated disease manage-

ment teams for each patient. For example, many renal patients

also suffer from diabetes or circulatory diseases, which have

traditionally been treated by individual specialists. In the

future, we intend to offer these patients medical services tar-

geted to their needs and managed by coordinated specialists,

whether delivered in a dialysis clinic, in an outpatient care

setting or during a hospital stay. Such Care Coordination can

also help to shorten hospital visits. Our aim is to both improve

medical outcomes and make care more efficient.

We are convinced there is substantial patient benefit in Care

Coordination and want to significantly grow in this segment

from last year’s revenue level of more than 1 billion U.S. dol-

lars. As part of this effort, Fresenius Medical Care made several

At the “Better Together” conference participants discussed

ways to improve patient care.

To Our S

hareholders

To Our Shareholders4

acquisitions in the U.S. We gained a network of clinical phy-

sicians through the acquisition of Sound Inpatient Physicians

and our acquisition of National Cardiovascular Partners helped

us grow into a leading provider of outpatient cardiovascular

treatment. Both acquisitions strengthened our Care Coordina-

tion business and moved Fresenius Medical Care closer to

patients.

Reaching new patients in emerging marketsWe are bringing our products and services closer to more

patients around the world by continually moving into new mar-

kets, especially in developing countries in Asia and Latin Amer-

ica. Last June, for example, I visited a major new Fresenius

Kabi production facility in the early stages of construction in

Beijing. It will come online by the end of this year and signif-

icantly expand our capacity to serve the increasing demand

in Asian markets from a local base. On the flight home, I could

not stop thinking about how our employees in the region

are seizing the opportunities in this rapidly evolving market.

Their dedication and entrepreneurial spirit serves as an inspi-

ration to everyone at Fresenius.

Growth opportunities for generic drugsHealthcare costs around the world are under close scrutiny,

and even in emerging markets, pricing will play a bigger role

in care decisions. For us, that will create opportunities for

further growth and new customers. Consider, for example,

generics, which are safe, effective, and much cheaper than

branded products. Fresenius Kabi offers a large variety of

intravenously administered (IV) drugs. Demand for generics

is growing much faster in the emerging markets than in

the U.S. and Europe, where we now make 82 percent of our

IV drug sales. In China, the market for generic IV drugs is

growing by more than 10 percent per year, yet so far IV drugs

are only a small part of our business there. To take advantage

of this growth opportunity, we have opened a development

center for oncological generics in Wuhan that will enable us

to respond more quickly to the needs of this key market. We

plan to file a large number of drug approval applications with

Chinese regulators in the coming years, and will produce the

drugs in the country. Chinese patients, the local healthcare

community and Fresenius will all benefit.

2014 – A successful yearOur financial results for 2014 provide evidence of our steady

progress. Group sales increased 16 percent to 23.2 billion

euros and Group net income before special items rose 4 per-

cent to 1.1 billion euros, both in constant currency.

These results were not easy to achieve. At this time last year,

I highlighted the challenges facing us in 2014 – price declines

in China, restrictions on using our blood volume substitutes,

A new Fresenius Kabi production facility under

construction in Beijing

To O

ur S

hare

hold

ers

To Our Shareholders 5

and, in the U.S., increased supply from competitors in the

IV drug market and dialysis reimbursement reductions. Team

Fresenius has responded with focus, discipline and dedica-

tion on the way to overcoming these challenges.

Better medicine for more peopleAround the world, healthcare costs and funding are in flux,

and the economic outlook remains uncertain. To successfully

navigate these challenges, we will rely on our proven strengths:

a strong focus on patients and customers, medical and tech-

nical innovation, quality and cost leadership. In short, we want

better medicine for more people.

We must also acknowledge and be prepared to take advan-

tage of the forces shaping our industry. Demand for health-

care services continues to increase globally for two primary

reasons: aging populations are increasingly in need of care,

and more people are gaining access to healthcare. Fresenius

is meeting this demand with products and services that make

quality healthcare more accessible around the world and will

continue to pursue new opportunities aggressively and with

entrepreneurial energy.

Steady future growthLooking ahead, we are optimistic about our growth prospects

in 2015. We expect Group sales growth of 7 to 10 percent

and a 9 to 12 percent increase in Group net income before

special items, both in constant currency. These are important

milestones on our way to the ambitious mid-term financial

goals we established: in 2017, we are targeting Group sales of

approximately 30 billion euros and Group net income between

1.4 and 1.5 billion euros. Achieving these goals will require

average annual growth of 9 percent in sales and 9 to 11 percent

in net income.

These are ambitious but realistic targets. To achieve them,

we will build on our strengths, benefit from our position at the

intersection of global healthcare trends, and remain commit-

ted to our “Closer to Patients” strategy. As an integrated care

company, we will continue to focus on creating a holistic

approach to delivering healthcare.

» In 2017, we are targeting Group sales of approximately 30 billion euros and Group net income between 1.4 and 1.5 billion euros. «

I thank you for being a part of our journey so far and encour-

age you to remain by our side as we continue to grow

Fresenius and increase access to quality healthcare around

the world.

Dr. Ulf M. Schneider

Chairman of the Management Board

Sum

mary

Summary6

SUMMARY OF THE FISCAL YEAR

SALES. Group sales increased by 14% to € 23,231 million (2013: € 20,331 million). Organic sales growth was 4%. Currency translation had a negative effect of 2%. Acquisitions contributed 12%. Divestitures had a marginal effect on sales growth.

EARNINGS. Group EBIT 1 reached an all-time high of € 3,158 million. The EBIT margin 1 was 13.6%. Group net income 1, 2 increased by 3% to € 1,086 million. Growth in constant currency was 4%.

1 Before special items2 Net income attributable to the shareholders of Fresenius SE & Co. KGaA

For a detailed overview of special items please see the reconciliation table on page 66.

SALES BY REGION

Latin America and other regions 7%

Asia-Pacific 9%

North America 40%

Europe 44%

2014: € 23.2 billion

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EARNINGS DEVELOPMENT

EBIT Net income EBIT margin

2,4182,563

3,075 1 3,045 13,158 1

770 2938 1, 2

1,051 1, 2 1,086 1, 2

660 2

€ in millions 2010 2011 2012 2013 2014

15.9%

15.0%

13.6%

15.1%15.7%

Sum

mar

y

Summary 7

CASH FLOW. Operating cash flow in-creased to € 2,585 million. It was influ-enced by the payment for the W.R. Grace bankruptcy settlement 3 at Fresenius Medical Care. The cash flow margin was 11.1%. Free cash flow before acquisitions and dividends was € 1,262 million.

BALANCE SHEET. Total assets increased by 22% to € 39,897 million mainly due to acquisitions. Total shareholders’ equity, including non controlling interest, increased by 17% to € 15,483 million. As of Decem-ber 31, 2014, the net debt / EBITDA ratio was 3.41 4 (December 31, 2013: 2.51 5).

3 Payment for the W.R. Grace bankruptcy settlement of US$ 115 million4 Pro forma acquisitions; before special items; 3.26 at 2014 average exchange rates for both net debt and EBITDA5 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary agreement for the acquisition of hospitals

and outpatient facilities of Rhön-Klinikum AG; before special items

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ASSETS EQUITY AND LIABILITIES

€ in millions

Non-current assets

Trade accounts receivable

Other current assets

Equity and noncontrolling interest

Debt

Other liabilities

14% 15%

22%20%10% 10%

39%39%

76% 75% 39%41%

32,758 32,75839,897 39,897

Dec. 31, 2013 Dec. 31, 2013Dec. 31, 2014 Dec. 31, 2014

OPERATING CASH FLOW

1,911

1,689

2,4382,320

2,585

€ in millions 2010 2011 2012 2013 2014

Operating cash flow Operating cash flow margin

12.0%10.3%

12.6%

11.4%11.1%

Fresenius Share

Fresenius Share8

STOCK MARKETS AnD DEvElOpMEnT Of ThE fRESEniuS ShAREAfter a strong start to the year on stock markets, geopolitical

risks and economic uncertainties increased, beginning in

mid-2014, before monetary policy measures restored confi-

dence and an early year-end rally began in November.

The DAX increased by 3%; the Euro Stoxx 50 gained

1% for the year. The European Dow Jones Stoxx 600 index

ended the year up by 4%. In this index, the health care

sector gained 18%. The leading U.S. indices also performed

well: The S & p 500 closed with a gain of 11%, while the Dow

Jones industrial Average gained 8%.

The Fresenius share continued its impressive develop-

ment: The closing price for the Fresenius share on Decem-

ber 31, 2014 was € 43.16. This represents a gain of 16% over

the closing price 1 of 2013, which means that the Fresenius

share was the fourth-strongest in the DAX.

In a comparison over five years, the Fresenius share

outperformed its benchmark DAX by 133 percentage points.

While the DAX rose by 65% over this period, the Fresenius

share gained 198%.

FRESENIUS SHARE. Fresenius shares continued their excellent performance in 2014, reaching a record high of € 44.12 in December. With an increase of 16%, Fresenius significantly out-performed the DAX.

1 Adjusted for share split

RELATIVE SHARE PRICE PERFORMANCE 2009 – 2014

FRESENIUS SHARE VS. DAX

400

350

300

250

200

150

100

50

0

%

50

45

40

35

30

25

20

15

10

€

30.12.2009 30.12.201130.12.2010 30.12.2012 30.12.2013 30.12.2014

Fresenius share in % DAX in % Fresenius high and low in € Fresenius share Monthly price range

ABSOLUTE SHARE PRICE PERFORMANCE 2014

FRESENIUS SHARE IN €

48.00

46.00

44.00

42.00

40.00

38.00

36.00

34.00

32.00

30.00

Dec. 13 Feb. 14 Apr. 14 Jun. 14 Aug. 14 Oct. 14 Dec. 14

Fres

eniu

s S

hare

Fresenius Share 9

The market capitalization of Fresenius was € 23.4 billion

as of December 31, 2014, an increase of 17% compared to

the previous year. The average daily trading volume on Xetra

decreased by 9% to 1,153,022 Fresenius shares compared

to the previous year (2013 adjusted for share split: 1,269,192).

DAX trading volume decreased by 17% in the same time

period.

In the United States, Fresenius has a Sponsored Level I

American Depositary Receipt (ADR) program. In this program,

four Fresenius ADRs correspond to one Fresenius share

(before share split the ratio was 8 : 1). The ADRs are traded in

the OTCQX International Premier market segment.

ShARE SpliT AnD CApiTAl inCREASE fROM COMpAnY funDSThe price of Fresenius shares was significantly over € 100 in

the middle of the year 2014. In order to promote trading in

the stock and to make it even more appealing to broad groups

of investors, on May 16, 2014, the Annual General Meeting

approved a capital increase from Company funds by issuing

new shares. The conversion of capital reserves tripled the

subscribed capital and 360,341,088 new shares were issued.

Each shareholder received two additional shares for every

Fresenius share held with no additional payment required

(share split). The share split reduced the share price without

affecting the overall value for shareholders and took place

on August 1, 2014 (see the Corporate Governance Report,

page 12).

The total number of issued shares at the end of 2014 was

541,532,600 (December 31, 2013 adjusted for share split:

539,084,487 shares).

KEY DATA OF THE FRESENIUS SHARE

2014 2013 2012 2011 2010

Number of shares 541,532,600 539,084,487 4 534,564,780 4 489,712,008 4 487,350,270 4

Stock exchange quotation 1 in €

High 44.12 37.31 4 32.12 4 25.20 4 22.53 4

Low 35.00 27.30 4 24.02 4 19.96 4 13.93 4

Year-end quotation 43.16 37.20 4 29.03 4 23.82 4 20.91 4

Market capitalization 2 in million € 23,373 20,054 15,520 11,668 10,301

Total dividend distribution in million € 238.3 3 224.6 196.0 155.1 139.7


Earnings per share in € 2.01 5 1.96 4, 5 1.81 4, 5 1.58 4, 6 1.36 4, 6

1 Xetra closing price on the Frankfurt Stock Exchange 2 Total number of ordinary shares multiplied by the respective Xetra year-end quotation on the Frankfurt Stock Exchange (ordinary and preference shares until January 28, 2011)3 Proposal4 Adjusted for share split 5 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2013 – 2014 before special items; 2012 before a non-taxable investment gain (€ 34 million)

and other one-time costs (€ 17 million) at Fresenius Medical Care as well as one-time costs (€ 29 million) related to the offer to the shareholders of Rhön-Klinikum AG6 Before effects of mark-to-market accounting of the Mandatory Exchangeable Bonds (MEB) and Contingent Value Rights (CVR) relating to the acquisition

of APP Pharmaceuticals

In addition to the share split, the number of shares increased

through the exercise of options under stock option plans.

Information on stock option plans can be found on pages 171

to 179 of the Notes to this Annual Report.

DiviDEnDIn 2014, Fresenius again delivered excellent financial results.

For the 22nd consecutive year, we are proposing to our share-

holders to increase the dividend by 6% per share, to € 0.44

(2013 adjusted for share split: € 0.42; pre split: € 1.25). The

DEVELOPMENT OF DIVIDENDS IN € 1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2

0.16

0.19

0.220.23

0.25

0.29

0.32

0.37

0.42

0.44

1 2005 – 2013 adjusted for share split2 Proposal

Fresenius Share

Fresenius Share10

total proposed dividend distribution will be € 238.3 million,

equivalent to 22% of Group net income before special items.

Based on the proposed dividend and the closing price at the

end of 2014, the dividend yield is 1.0%.

Fresenius shares are an attractive investment. Anyone who

invested € 1,000 five years ago and reinvested the dividends

would have increased their capital to € 3,337 as of Decem-

ber 31, 2014. That is an average annual return of 27% (before

expenses and taxes).

ShAREhOlDER STRuCTuREThe charts show the shareholder structure by the end of 2014.

The Else Kröner-Fresenius Foundation was the largest share-

holder of Fresenius SE & Co. KGaA, with 26.72% of the shares.

As of November 28, 2014, according to a notification under

the German Securities Trading Act (WpHG), BlackRock Inc.

held 5.95% of the shares. For further information on these

notifications, please see pages 147 f. of the Notes.

As of December 31, 2014, a shareholder survey identified

the ownership of about 93% of our subscribed capital. The

shareholder base of Fresenius is solid: a total of 587 institu-

tional investors held about 331.2 million shares or 61% of sub-

scribed capital; 24.6 million shares were identified as retail

holdings. The top-ten investors held about 22% of the share

capital. Our shares were mostly held by investors in Germany,

the United States, and Great Britain.

AnAlYST RECOMMEnDATiOnS The recommendations published by financial analysts are an

important guide for institutional as well as private investors

when making investment decisions. According to our survey, as

of February 24, 2015, we were rated with 15 “buy,” 9 “hold,”

and 0 “sell” recommendations.

The list of banks that provide regular analyst coverage of

Fresenius and their latest recommendations can be found

at www.fresenius.com.

invESTOR RElATiOnSOur Investor Relations activities are in accordance with the

transparency rules of the German Corporate Governance Code.

We communicate comprehensively, promptly, and openly

with private and institutional investors as well as financial ana-

lysts. The equal treatment of all market actors is very impor-

tant to us.

We intensified our dialog with the capital markets in

2014. In addition to its quarterly conference calls and web-

casts, Fresenius gave presentations in all the major European

and U.S. financial markets. We expanded our contacts with

institutional investors and analysts at 27 international inves-

tor conferences, 20 roadshows, and numerous one-on-one

meetings. We also organized field trips with banks, giving

investors and analysts the opportunity to discuss matters with

the Management Board.

We also continued the dialog with our private investors,

especially via the Internet. Our private shareholders can follow

live webcasts of the conference calls and can use our continu-

ously increased information offer on our website.

If you would like to contact us or find out about our 2015

financial calendar, please take a look at the last page of this

report or visit us at www.fresenius.com.

SHAREHOLDER STRUCTURE BY REGION

Other regions 4%

Rest of Europe 13%

Great Britain 15%

USA 17%

Not identified 7%

Germany 44%

SHAREHOLDER STRUCTURE BY INVESTORS

Retail holdings 5%

Else Kröner-Fresenius Foundation 27%

Not identified 7%

Institutional

investors 61%

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Corporate Governance Corporate Governance Declaration 11

In this Corporate Governance Declaration, the Supervisory

Board of Fresenius SE & Co. KGaA and the Management

Board of the general partner of Fresenius SE & Co. KGaA,

Fresenius Management SE (Management Board), report,

pursuant to Section 289a of the German Commercial Code

(HGB), on corporate management and, pursuant to number

3.10 of the German Corporate Govern ance Code, on the

Corporate Governance at the Company (Corporate Gover

nance Report). The Corporate Governance Declaration

and the Corporate Governance Report are published on the

website at www.fresenius.com.

Corporate GovernanCe

DeClaration

GroUp ManaGeMent anD SUperviSion StrUCtUre anD Corporate BoDieS

GroUp ManaGeMent anD SUperviSion

StrUCtUre

The Company has the legal form of a KGaA (Kommanditgesell

schaft auf Aktien – partnership limited by shares). The annual

General Meeting, the Supervisory Board, and the general

partner Fresenius Management SE are the legal corporate

bodies. There have been no changes in the Group manage

ment and the super vision structure in the reporting period.

The chart on the following page provides an overview of the

Group structure.

The articles of association of Fresenius SE & Co. KGaA,

which, in addition to legal provisions, further define the respon

sibilities of the individual corporate bodies, can be down

loaded from our website www.fresenius.com.

ShareholDerS

The shareholders uphold their rights at the Annual General

Meeting, where they exercise their voting rights. Every ordi

nary share of Fresenius SE & Co. KGaA confers one vote.

None of the shares carry multiple or preferential voting rights.

We report in detail on our investor relations activities

on page 22 and in the section “Fresenius share” on page 10.

annUal General MeetinG

Our Annual General Meeting (AGM) was held on May 16,

2014, in Frankfurt / Main. Approximately 74% of the share

capital was represented.

During the AGM, the shareholders voted with a majority

of more than 99% of the votes cast for the proposal made by

the general partner and the Supervisory Board to increase

CORpORATE GOvERNANCE DEClARATIONAND REpORT. The Supervisory Board and the Management Board are committed to responsible management that is focused on achieving a sus-tainable increase in the value of the Company. Long-term corporate strategies, solid financial man-agement, strict adherence to legal and ethical business standards, and transparency in corporate communication are key factors.

Corporate G

overnance

Corporate Governance12

the 2013 dividend by 14% to € 1.25 per ordinary share. With

a majority of approximately 99% they approved a capital

increase from company funds by issuing new shares. The con

version of capital reserves tripled the subscribed capital from

company funds. Each shareholder received two additional

shares for each Fresenius share held with no additional pay

ment required (share split). In connection with the share split,

the shareholders approved the amendment of various exist

ing authorizations, including with regard to authorized capital,

the issue of option bearer bonds and / or convertible bonds,

and the purchase and use of own shares. The resolutions on

the approval of the Company’s annual financial statements,

on the approval of the adaptation of existing enterprise agree

ments, the resolution on a capital increase from Company

funds with issue of new shares, the adaptation of the autho

rized capital, the adaptation of the authorization to issue option

bonds and / or convertible bonds, the adaptation of the autho

rization to purchase and use own shares, as well as the autho

rization to use equity derivatives to purchase own shares

required the approval of the general partner, which was duly

given.

With regard to certain subject matters, legally required voting

right exclusions exist for the general partner and in some

instances for its sole shareholder, the Else Kröner Fresenius

Stiftung. These pertain, for example, to the appointment of

the Supervisory Board of Fresenius SE & Co. KGaA, the approval

of the actions of the general partner and the members of

the Supervisory Board, and the selection of the auditor. This

guarantees that the remaining shareholders retain the sole

authority to decide on these matters, especially those that per

tain to the super vision of management.

Documents and information on the Annual General Meet

ing as well as the voting results are available on our website


ManaGeMent BoarD anD SUperviSorY

BoarD proCeDUreS

The responsibilities are distributed as follows in Fresenius

SE & Co. KGaA: The Management Board of the general partner

is responsible for conducting the business of Fresenius SE &

Co. KGaA. The Supervisory Board of Fresenius SE & Co. KGaA

supervises the management of the Company’s business by

the general partner.

STRuCTuRE FRESENIuS SE & CO. KGAA

Else KrönerFreseniusStiftung

Fresenius Management Se (general partner)

Fresenius Se & Co. KGaa

Annual General Meeting Fresenius Management SE

Annual General Meeting Fresenius SE & Co. KGaA

Supervisory Board Fresenius Management SE

Supervisory Board Fresenius SE & Co. KGaA

Free float

100%

reduced voting power 1

manages

73%27%

elects elects

supervises / appoints board

supervises management

1 For selected items no voting power, e. g., election of Supervisory Board Fresenius SE & Co. KGaA, discharge of general partner and Supervisory Board of Fresenius SE & Co. KGaA, election of the auditor

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General partner – Management and Supervisory BoardsThe general partner Fresenius Management SE, represented

by its Management Board, manages Fresenius SE & Co. KGaA

at its own responsibility and conducts its business. The Man

agement Board formulates the Company’s strategy, discusses

it with the Supervisory Boards of Fresenius Management SE

and of Fresenius SE & Co. KGaA, and oversees its implemen

tation. Its actions and decisions are aligned with the best

interests of Fresenius SE & Co. KGaA. The Management Board

is committed to increasing the value of the Company on a

sustainable basis. The rules of procedure for the Management

Board were established by the Supervisory Board of Fresenius

Management SE. They define the activities within the board

more specifically, especially with regard to the individual duties

and responsibilities of the members, matters reserved for the

full Management Board, and resolutions to be passed by the

full Management Board. The meetings of the Management

Board are convened as required, but at least once a month,

and are chaired by the Chairman of the Management Board

or, if he is incapacitated, by the Chief Financial Officer or, if

he is also incapacitated, by the Management Board member

present who is most senior in age. However, Management

Board meetings are usually held twice a month. The person

chairing the meeting decides the order in which the items on

the agenda are dealt with and the form in which the voting

is conducted. The Management Board passes its resolutions by

a simple majority of the votes cast or, outside its meetings,

by a simple majority of its members, except in cases where

mandatory provisions of law impose stricter requirements.

The Chairman of the Management Board has the casting vote

if a vote is tied. If the Chairman is incapacitated or absent,

the motion is deemed rejected if a vote is tied. The rules of

procedure for the Management Board also govern the rela

tions between the Management Board and the Supervisory

Board of the general partner as well as between the general

partner and the Supervisory Board of Fresenius SE & Co. KGaA,

and also matters that require approval of the general part

ner’s Supervisory Board.

The Management Board consists of seven members: the

Chairman, the Chief Financial Officer, the Chief legal and

Compliance Officer and labor Relations Director, as well as the

chief executive officers of the four business segments. This

ensures that the full Management Board is kept constantly

informed about important events, plans, developments, and

measures within the business segments. There are no Man

agement Board committees owing to Fresenius SE & Co. KGaA’s

role as an operating holding company. The Management Board

is listed on page 192 of the Annual Report.

As a European company (SE – Societas Europaea),

Fresenius Management SE has its own Supervisory Board.

It consists of six members, and its Chairman is Dr. Gerd

Krick. The Super visory Board appoints the members of the

Management Board of Fresenius Management SE and super

vises and advises the Management Board by conducting

the business. It established its rules of procedure following

the recommendation in number 5.1.3 of the Code.

The Supervisory Board members of Fresenius Manage

ment SE can be found on page 193 of the Annual Report.

the Supervisory Board of Fresenius Se & Co. KGaa

The Supervisory Board of Fresenius SE & Co. KGaA supervises

the management of the Company’s business by the general

partner. It supervises business operations to ensure that corpo

rate decisions are compliant, suitable, and financially sound.

The members of the Management Board of the general partner

are appointed by the Supervisory Board of Fresenius Man

agement SE, not – as already explained – by the Super visory

Board of Fresenius SE & Co. KGaA.

The Supervisory Board of Fresenius SE & Co. KGaA consists

of twelve members. Half of its members are elected by the

AGM. The proposals for the members of the Supervisory Board

primarily take account of the knowledge, ability, and expert

experience required to perform the tasks. The election pro

posal provided by the Supervisory Board will take into account

the Company’s international activities, potential conflicts of

interest, the number of independent members of the Super

visory Board within the meaning of number 5.4.2 of the Code,

and diversity. This also includes the aim to establish appro

priate female representation on a longterm basis. It is not in

the Company’s interest to generally limit the selection of quali

fied candidates. However, in the Company’s interest not to

limit the selection of qualified candidates in a general way, the

Supervisory Board confines itself to a general declaration of

intent and particularly refrains from an age limit. The statuto

rily required declaration of conformity concerning the Code

Corporate G

overnance


accordingly includes a justified limitation. A Nomination Com

mittee has been instituted for election proposals for the

shareholders’ representatives. Its activities are aligned with

the provisions of law and the Code. The European works

council elects the employee representatives to the Super

visory Board of Fresenius SE & Co. KGaA.

The Supervisory Board includes what it deems to be an

appropriate number of independent members who do not

have any business or personal relationship with the Company,

its corporate bodies, a controlling shareholder, or a party

related to the latter that may give grounds for a material and

not merely temporary conflict of interest. The articles of

association of Fresenius SE & Co. KGaA regulate the details

with regard to the Supervisory Board’s election, constitution,

term of office, meetings and resolutions, and rights and duties.

They are published on our website at www.fresenius.com.

The Supervisory Board of Fresenius SE & Co. KGaA has

established its rules of procedure in accordance with number

5.1.3 of the Code. The Chairman of the Supervisory Board is

responsible for coordinating the activities of the Supervisory

Board, chairing the meetings, and representing its interests

externally. The Supervisory Board should convene once each

calendar quarter, and must convene twice each calendar half

year. The meetings are convened and chaired by the Chair

man or, if he is incapacitated, by a chairperson named by the

Chairman. The person chairing the meeting decides the order

in which the items on the agenda are dealt with and the form

in which the voting is conducted. unless other majorities are

mandatory by law, the Supervisory Board passes its resolu

tions by a simple majority of the votes submitted in the voting.

If a vote is tied, the Chairman has the casting vote or, if he

does not take part in the voting, the matter is decided by the

vote of the Deputy Chairman, who is a shareholder repre

sentative.

The Supervisory Board of Fresenius SE & Co. KGaA con

ducts its business in accordance with the provisions of law,

the articles of association of Fresenius SE & Co. KGaA, and its

rules of procedure. The Management Board of the general

partner Fresenius Management SE continuously informs the

Supervisory Board of the corporate development, planning,

and strategy. The Supervisory Board supervises the Company’s

management and, taking into account the auditor’s reports,

reviews the Group’s annual financial statements. Another im

portant part of the Supervisory Board’s activities is the work

conducted within the committees formed in accord ance with

the requirements of the German Stock Corporation Act and

the recommendations of the Code.

The members of the Supervisory Board keep themselves

regularly informed, through internal and external sources,

about the latest requirements with regard to their supervisory

activ ities. With the support of the Company, the Supervisory

Board at all times ensures that its members are suitably quali

fied, keep their professional knowledge up to date, and further

develop their judgment and expertise to the extent necessary

for the proper performance of their duties, including those

of the Supervisory Board committees. various external experts

as well as experts from the Company provide information

about important developments, for example about the strate

gic orientation of the Company in growth markets, relevant

new laws and precedents, or changes in the u.S. GAAp and

IFRS accounting and auditing standards.

The members of the Supervisory Board of Fresenius SE &

Co. KGaA can be found on pages 190 to 191 of the Annual

Report. On pages 184 to 189 of the Annual Report, the Super

visory Board reports on the main focuses of its activities and

those of its committees in 2014.

Supervisory Board efficiency evaluationThe Supervisory Board of Fresenius SE & Co. KGaA deliber

ated on the efficiency evaluation in accordance with number

5.6 of the Code at its meeting in March 2014.

It reviewed the efficiency of its activities through an open

discussion within the full Supervisory Board. A company-

specific questionnaire covering the salient points for a self

evaluation served as the basis for the discussion. Among

other things, this included the organization and structuring of

the meetings, the amount of information, and how this infor

mation was provided. The selfevaluation showed that the

Supervisory Board assesses its organization as well as its work

as efficient.

Cooperation between general partner and Supervisory Board of Fresenius Se & Co. KGaa

Good corporate governance requires trusting and efficient

cooperation between the Management and the Supervisory

Board. The Management Board of the general partner and the

Supervisory Board of Fresenius SE & Co. KGaA closely coop

erate for the benefit of the Company. Open communication is

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essential. The common goal is to sustainably increase the

company value in line with the corporate govern ance and com

pliance principles. The Management Board of the general

partner and the Supervisory Board of Fresenius SE & Co. KGaA

coordinate with each other, especially with regard to the

Company’s strategic focus. As the monitoring body, the Super

visory Board of Fresenius SE & Co. KGaA also needs to be

fully informed about operating performance and corporate

planning, as well as the risk situation, risk management, and

compliance. The Management Board of the general partner

provided this information in full and in compliance with its

duties.

CoMpoSition anD proCeDUreS oF the

SUperviSorY BoarD CoMMitteeS

The Supervisory Board of Fresenius SE & Co. KGaA forms two

permanent committees from among its members: the Audit

Committee, consisting of five members, and the Nomination

Committee, consisting of three members. The committee

members were elected for the duration of their term as a mem

ber of the Supervisory Board of Fresenius SE & Co. KGaA. In

accordance with the articles of association of Fresenius SE &

Co. KGaA, only members of the Audit Committee receive addi

tional compensation (Section 13 (2)). There is no personnel

Committee in the KGaA because the Supervisory Board of

Fresenius SE & Co. KGaA is not responsible for appointing mem

bers of the Management Board of the general partner or for

their contracts. Responsibility for these personnel matters lies

with the Supervisory Board of the general partner.

The provisions for the Supervisory Board of Fresenius SE &

Co. KGaA apply analogously to the committees. The commit

tees hold meetings as required. The meetings are convened by

the committee chairmen. They report during the following

Supervisory Board meeting about the work of the respective

committee. The rules of procedure for the committees are

regulated in the rules of procedure of the Supervisory Board

of Fresenius SE & Co. KGaA. The committees do not have their

own rules of procedure.

The members of the Supervisory Board’s committees are

listed on page 191 of the Annual Report.

audit Committeeprof. Dr. h. c. Roland Berger is the Chairman of the Audit

Committee. He has the required expertise in the fields of

accounting and auditing stated in Section 100 (5) of the Ger

man Stock Corporation Act (AktG). The Committee’s func

tion is, among other things, to prepare the Supervisory Board’s

approval of the financial statements – and the consolidated

financial statements – and the Supervisory Board’s proposal

to the AGM on the appointment of the auditor for the finan

cial statements, and to make a preliminary review of the pro

posal on the allocation of distributable profits. It also reviews

the quarterly reports before they are published and – follow

ing discussions with the Management Board – engages the

auditor for the financial statements (and concludes the agree

ment on the auditor’s fees), determines the main focuses of

the audit, and defines the auditor’s reporting duties in relation

to the Supervisory Board of Fresenius SE & Co. KGaA. Other

matters within its remit are to review the effectiveness of the

internal controls system, of the risk management system, of

the internal audit system, and of the compliance.

The Audit Committee consists of prof. Dr. h. c. Roland

Berger (Chairman), Konrad Kölbl, Dr. Gerd Krick, Gerhard

Roggemann, and Rainer Stein.

nomination CommitteeThe Nomination Committee proposes suitable candidates to

the Supervisory Board for the nominations it makes to the

AGM for the election of Supervisory Board members on the

shareholders’ side. It consists solely of shareholder represen

tatives. In making its proposals, the Nomination Committee

is guided by the requirements of the Code.

The Nomination Committee consists of Dr. Gerd Krick

(Chairman) and prof. Dr. h. c. Roland Berger. Dr. Gerhard

Rupprecht, who was killed in an accident in August 2014, was

also a member of the Nomination Committee.

Mediation CommitteeFresenius SE & Co. KGaA does not have a Mediation Commit

tee because the provisions of the German CoDetermination

Act that require such a committee do not apply to a partner

ship limited by shares and because the Code also does not

require such a committee.

Corporate G

overnance


Joint CommitteeFor some matters, which are defined in further detail in Sec

tion 13c (1) of the articles of association of Fresenius SE &

Co. KGaA, the general partner requires the approval of the

Joint Committee if 40% of the consolidated sales, the consol

idated balance sheet total, and the consolidated profit are

affected by the matter. These include, for example, the dives

titure and acquisition of large investments and business units

or the divestiture of large business units from the assets

of Fresenius SE & Co. KGaA or a wholly owned company. The

approval of the Joint Committee is also required for certain

legal transactions between Fresenius SE & Co. KGaA or its affil

iates and the Else KrönerFreseniusStiftung.

Dr. Gerd Krick is a member of the Joint Committee.

Dr. Gerhard Rupprecht, who was killed in an accident in

August 2014, was a member until August 2014. Other

members are Dr. Dieter Schenk (Chairman) and Dr. Karl

Schneider, who were appointed by the general partner.

The Joint Committee did not meet in 2014.

Information on positions held by committee members on stat

utorily required supervisory boards and comparable domes

tic and foreign control bodies of other business enterprises can

be found on pages 190 to 193 of the Annual Report.

relevant DiSCloSUreS on Corporate GovernanCe praCtiCeSThe general partner, represented by its Management Board,

manages the Company’s business with the due care and dili

gence of a prudent and conscientious company director in

compliance with the provisions of the law, the articles of asso

ciation, the rules of procedure for the Management Board,

the resolutions passed by the full Management Board, and the

Supervisory Board of the general partner. Corporate gover

nance practices extending beyond the requirements of law are

defined in the Fresenius Code of Conduct. This Code of Con

duct contains the key principles and rules for our conduct

within the Company and in our relations with external partners

and with the public. We have published the Fresenius Code

of Conduct on our website at www.fresenius.com. The Code

of Conduct is binding for all Company employees and must

be complied with regarding any type of business relationship.

Our executives regard ensuring compliance with the princi

ples of the Code of Conduct as part of their managerial respon

sibilities.

CoMplianCe

Our “Forward Thinking Healthcare” model is the maxim for

corporate governance at Fresenius, determines our corporate

culture, and is an integral part of our daytoday work. It is

the basis for our corporate values reflected in the Fresenius

Code of Conduct. In this Code of Conduct, the Management

Board commits itself without limitation to binding principles

and rules for conduct within the Company and in its course

of the business. These include professionalism, honesty, and

integrity in relations with our patients, customers, suppliers,

employees, and shareholders. Furthermore, in its Code of Con

duct, Fresenius commits itself to fair competition and to deal

ing honestly with business partners and officials. Fresenius

expects all of its employees to comply with all applicable prin

ciples, laws, and regulations. Breaches will not be tolerated

and will be pursued.

Company guidelines and rules of procedure provide

specific details regarding the regulations included in the

Fresenius Code of Conduct. Their purpose is to help our

employees make the right decisions in their daytoday work.

The Fresenius Code of Conduct is complemented by the

codes of conduct and compliance programs of the Company’s

business segments. The latter comply with the requirements

that arise from their specific activities and are generally not

interfered with as long as they are not in conflict with the

Fresenius Code of Conduct. The Fresenius Code of Conduct

accordingly applies to all employees of the Fresenius Group.

Employees are obliged to report any noncompliance with

the Code, or if they become aware of a potential noncompli

ance, to their superiors or a compliance manager. The Code

of Conduct explicitly rules that no employee may incur any

disadvantage as a result of reporting a potential breach of the

Code. That is why breaches of the Code of Conduct may also

be reported anonymously to an email address set up for this

purpose. In various business segments breaches may also be

reported via a whistleblower hotline.

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Regular training, for example on the Code of Conduct in

general or on specific topics, such as anticorruption and cartel

law, helps our employees to comply with the Fresenius Code

of Conduct, the Company guidelines, and our rules of pro

cedure. Fresenius gives top priority to this training, which is

obligatory for all employees, including management. The

aim is to make participants aware of potential breaches of com

pliance and for them to learn to recognize and avoid risks

and conflicts of interest at an early stage. Since 2012, besides

participating in person, it has been possible to do the train

ing online.

The internal audit division audits business segments and

Group companies also in regard to compliancerelevant

issues. It discusses potential areas of risk prior to, and takes

account of them in, its audit. If the results of an audit reveal

any potential for improvement, this will be implemented jointly

with the Corporate Compliance department at Fresenius SE &

Co. KGaA.

Monitoring compliance is a central duty of management

at all levels. The Corporate Compliance department reports

to the Chief Compliance officer – the member of the Manage

ment Board responsible for legal Affairs, Compliance, and

Human Resources. It supports him in developing and imple

menting guidelines and procedures aimed at ensuring com

pliance with statutory regulations and the requirements of the

Fresenius Compliance program.

Each business segment has initiated compliance activities

and guidelines, and appointed a Chief Compliance Officer.

This officer is in charge of introducing, developing, and mon

itoring compliance. Depending on the organizational and

business structures, the Chief Compliance Officer is assisted by

additional compliance officers. The employees at the Cor

porate Compliance department similarly support and advise

the compliance officers of the business segments, as well as

at the regional and local levels.

The Compliance Steering Committee is the central com

mittee for discussing compliance issues. It comprises the

Chief Compliance Officer, the Chief Financial Officer, and the

heads of legal Affairs, Internal Audit, and the Corporate

Compliance department. It deals with the status of major proj

ects and discusses procedures concerning recognized risks

and the steps to be taken to identify breaches of compliance.

It also specifies procedures for dealing with any breach.

The supervisory bodies at Fresenius SE & Co. KGaA as well

as the general partner, Fresenius Management SE, are regu

larly informed – no less than once a year – about compliance

within the Group.

riSK ManaGeMent anD Control SYSteM

In our view, the responsible handling of risks is an element

of good corporate governance. Fresenius has a systematic

risk management and control system that allows the Manage

ment Board to make early identifications of risks and market

trends and to react promptly to relevant changes in our risk

profile. Our risk management and control system and efficiently

designed processes help to enhance the Company’s perfor

mance. Our risk management is reviewed as part of the annual

audit of the financial statements. The control system is regu

larly reviewed by the Management Board and the Internal

Audit division. Further information can be found on pages 83

to 84 of the Management Report.

The Internal Audit division supports the Management

Board as an independent function outside the Company’s day

today operations. The division assesses internal processes

from an objective viewpoint and with the necessary distance.

Our goal is to create added value for Fresenius, and thus to

help achieve organizational goals through improved internal

controls, optimized business processes, cost reduction, and

efficiency increases, as well as the prevention of corruption.

Fresenius Medical Care AG & Co. KGaA has its own inter

nal risk management and control system.

GerMan Corporate GovernanCe anD DeClaration oF ConForMitYThe German Corporate Governance Code aims to provide more

transparency for investors with regard to existing regula

tions covering the management and monitoring of companies.

Our valueenhancing strategies, as well as the majority of

the guidelines, recommendations, and suggestions for respon-

sible management contained in the Code, have been basic

components of our activities for many years. Corporate gover

nance. Extensive information can be found on our website


Corporate G

overnance


The Management Board of the general partner of Fresenius

SE & Co. KGaA, Fresenius Management SE, and the Supervi

sory Board of Fresenius SE & Co. KGaA have issued the required

Declaration of Conformity pursuant to Section 161 of the

German Stock Corporate Act (AktG) and have made it available

to shareholders on the website of the Company:

“Declaration by the Management Board of the general

partner of Fresenius Se & Co. KGaa, Fresenius Manage-

ment Se, and by the Supervisory Board of Fresenius Se &

Co. KGaa on the German Corporate Governance Code

pursuant to Section 161 German Stock Corporation act

(aktiengesetz).

The Management Board of the general partner of Fresenius

SE & Co. KGaA, Fresenius Management SE, (hereafter the Man

agement Board) and the Supervisory Board of Fresenius SE &

Co. KGaA declare that since the issuance of the previous dec

laration of conformity in December 2013, the recommenda

tions of the “Government Commission on the German Cor

porate Governance Code” published by the Federal Ministry

of Justice (Justizministerium) in the official section of the

Federal Gazette (Bundesanzeiger) (hereafter the Code) in the

version of May 13, 2013 as well as in the version of June 24,

2014 since its publication in the Federal Gazette have been

met and that the recommendations of the Code in the version

of June 24, 2014 will also be met in the future. Only the follow

ing recommendations of the Code in the versions of May 13,

2013 and June 24, 2014 have not been and will not be met:

▶ Code number 4.2.3 paragraph 2 sentence 6:

Caps regarding specific compensation amounts

pursuant to Code number 4.2.3 paragraph 2 sentence 6,

the amount of compensation for Management Board

members shall be capped, both overall and for variable

compensation components.

This recommendation is not met. The service agree

ments with members of the Management Board do not

provide for caps regarding specific amounts for all com

pensation components and accordingly not for caps

regarding specific amounts for the overall compensation.

The performanceoriented shortterm compensation

(the variable bonus) is capped. As regards stock options

and phantom stocks as compensation components with

longterm incentives, the service agreements with mem

bers of the Management Board do provide for a possibility

of limitation but not for caps regarding specific amounts.

Introducing caps regarding specific amounts in relation

to such stockbased compensation components would con

tradict the basic idea of the members of the Manage

ment Board participating appropriately in the economic

risks and opportunities of the company. Instead of that,

Fresenius pursues a flexible concept considering each

individual case. In situations of extraordinary developments

in relation to the stockbased compensation which are

not related to the performance of the Management Board,

the Supervisory Board may cap the stockbased com

pensation.

▶ Code number 4.2.3 paragraph 4: Severance payment cap

pursuant to Code number 4.2.3 paragraph 4, in conclud

ing Management Board contracts, care shall be taken to

ensure that payments made to a Management Board

member on premature termination of his / her contract, in

cluding fringe benefits, do not exceed the value of two

years’ compensation (severance payment cap) and com

pensate no more than the remaining term of the service

agreement. The severance payment cap shall be calculated

on the basis of the total compensation for the past full

financial year and if appropriate also the expected total

compensation for the current financial year.

These recommendations are not met insofar as the ser

vice agreements of the members of the Management

Board do not contain severance payment arrangements for

the case of premature termination of the contract and

consequently do not contain a limitation of any severance

payment amount to this extent. uniform severance pay

ment arrangements of this kind would contradict the con

cept practiced by Fresenius in accordance with the Ger

man Stock Corporation Act (Aktiengesetz) according to

which service agreements of the members of the Manage

ment Board are, in principle, concluded for the period

of their appointment. They would also not allow for a well

balanced assessment of the individual case.

▶ Code number 4.2.5 paragraph 3: presentation in the

compensation report

pursuant to Code number 4.2.5 paragraph 3, the presenta

tion of the compensation for each individual member of

the Management Board in the compensation report shall

present the maximum and minimum achievable com

pensation for variable compensation components by using

corresponding model tables. The presentation of the

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compensation granted pursuant to the description for

model table 1 shall also specify the target value or a com

parable value of an “average probability scenario” for

the oneyear variable compensation and for the deferrable

portions from oneyear variable compensations (deferrals).

Fresenius, in deviation from Code number 4.2.3 para

graph 2 sentence 6, does not provide for caps regarding

specific amounts for all variable compensation compo

nents and, therefore, does not provide for caps regarding

specific amounts for the overall compensation. There

are no target values or comparable values for the oneyear

variable compensation and for the deferrable portions

from oneyear variable compensations (deferrals). The one

year variable compensation is determined on the basis

of bonus curves applicable to several years. In this respect,

the compensation report cannot meet the recommenda

tions of the Code. Irrespective thereof, Fresenius will con

tinue to present its compensation system and the amounts

paid to members of the Management Board in its com

pensation report in a comprehensive and transparent man

ner. The compensation report will include tables relating

to the value of the benefits granted as well as to the allo

cation in the year under review which follow the structure

and largely also the specifications of the model tables.

▶ Code number 5.1.2 paragraph 2 sentence 3: age limit

for members of the Management Board


an age limit shall be specified for members of the Man

agement Board. As in the past, Fresenius will refrain from

determining an age limit for members of the Manage

ment Board in the future. Complying with this recommen

dation would unduly limit the selection of qualified can

didates.

▶ Code number 5.3.2 sentence 3: independence of the

Chairman of the audit Committee

pursuant to Code number 5.3.2 sentence 3, the Chairman

of the Audit Committee shall be independent. pursuant

to Code number 5.4.2 sentence 2, a Supervisory Board

member is not to be considered independent in particular

if he / she has personal or business relations with the

company, its executive bodies, a controlling shareholder

or an enterprise associated with the latter which may

cause a substantial and not merely temporary conflict of

interests.

The Chairman of the Audit Committee of Fresenius SE &

Co. KGaA, prof. Dr. h. c. Roland Berger, is at the same

time a shareholder of Roland Berger Strategy Consultants

Holding GmbH and the Honorary Chairman of the Super

visory Board of Roland Berger Strategy Consultants Hold

ing GmbH. During the course of the 2014 financial year

(as in previous years), the Fresenius Group has made use

of consultancy services provided by Roland Berger Strategy

Consultants GmbH, an affiliated enterprise of the man

agement consultancy Roland Berger Strategy Consultants

Holding GmbH. The Management Board and Supervi

sory Board believe that these business relations neither

constitute a substantial or longterm conflict of interest,

nor do they interfere with the tasks of the Chairman of the

Audit Committee. As a precaution, however, a deviation

from Code number 5.3.2 sentence 3 is being declared,

given the legal views taken with regards to the question of

independence.

▶ Code number 5.4.1 paragraph 2 and paragraph 3:

Specification of concrete objectives regarding the

composition of the Supervisory Board and their

consideration when making recommendations to

the competent election bodies

pursuant to code number 5.4.1 paragraph 2 and paragraph

3, the Supervisory Board shall specify concrete objectives

regarding its composition and, when making recommen

dations to the competent election bodies, take these objec

tives into account. The objectives specified by the Super

visory Board and the status of the implementation shall be

published in the Corporate Governance Report. These

recommendations are not met. The composition of the

Supervisory Board needs to be aligned to the enterprise’s

interest and has to ensure the effective supervision and

consultation of the Management Board. Hence, it is a mat

ter of principle and of prime importance that each mem

ber is suitably qualified. When discussing its recommenda

tions to the competent election bodies, the Supervisory

Board will take into account the international activities of

the enterprise, potential conflicts of interest, the number

of independent Supervisory Board members within the

Corporate G

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FUrther inForMation on

Corporate GovernanCe

DiverSitYThe Management Board takes diversity into account when

filling executive positions. An appropriate degree of female

representation is especially important when selecting equally

qualified candidates. The commitment to diversity within

the Fresenius Group is underlined by the fact that 30% of our

executive officers are women.

Further information on diversity as well as personnel

development and personnel management are included in the

Group Management Report on pages 52 f.

leGal relationShipS with MeMBerS oF the Corporate BoDieSThe general partner and the Supervisory Board of Fresenius

SE & Co. KGaA have a duty to act in the best interests of the

Company. In performing their activities, they do not pursue

personal interests or bestow unjustified benefits on others.

Any sideline activities or transactions with the Company by

members of the corporate bodies must be reported to, and

approved by, the Supervisory Board. The Supervisory Board

of Fresenius SE & Co. KGaA reports to the AGM on any con

flicts of interest and how they are dealt with.

Fresenius SE & Co. KGaA reports the following relation

ships existing between Fresenius group companies and

companies in which members of the Supervisory Board of

Fresenius SE & Co. KGaA or members of the Supervisory

or Management Board of Fresenius Management SE held an

executive or other function in 2014.

prof. Dr. med. D. Michael Albrecht is a member of the

Supervisory Board of Fresenius SE & Co. KGaA and medical

director and spokesman for the management board of the

university Hospital Carl Gustav Carus Dresden, as well as a

member of the supervisory board of the university Hospital

in Aachen and he was a member of the supervisory boards

of the university Hospitals in Magdeburg and Rostock. The

Fresenius Group maintains business relations with these hos

pitals in the ordinary course of business under customary

conditions.

meaning of Code number 5.4.2, and diversity. This includes

the aim to establish an appropriate female representation

on a longterm basis.

In the enterprise’s interest not to limit the selection of

qualified candidates in a general way, the Supervisory

Board, however, confines itself to a general declaration of

intent and particularly refrains from an age limit.

▶ Code number 5.4.6 paragraph 2 sentence 2: a perfor-

mance-related compensation of the members of the

Supervisory Board oriented toward sustainable growth

of the enterprise


a performancerelated compensation, if promised to the

members of the Supervisory Board, shall be oriented

toward sustainable growth of the enterprise. The variable

compensation of the Supervisory Board members of

Fresenius SE & Co. KGaA does not have a calculation basis

of several years and is, therefore, not oriented, in this

sense, toward the sustainable growth of the enterprise.

Instead, the Supervisory Board receives a performance

related compensation which depends on the dividend pur

suant to Section 13 paragraph 1 of the Articles of Asso

ciation of Fresenius SE & Co. KGaA. This compensation

model has been in existence since the year 1995. It con

tinues to bring forth an adequate compensation of the

Supervisory Board in line with the law and with the inter

ests of the shareholders.

Bad Homburg, December 2014

Management Board of the general partner of

Fresenius SE & Co. KGaA, Fresenius Management SE,

and Supervisory Board of Fresenius SE & Co. KGaA”

In accordance with Section 161 para. 2 AktG and number 3.10

sentence 3 of the Code, this declaration and all past decla

rations are published on our website at www.fresenius.com.

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Corporate Governance Further information on Corporate Governance 21

Klauspeter Müller is a member of the Supervisory Boards

of Fresenius Management SE and of Fresenius SE & Co. KGaA

and the Chairman of the Supervisory Board of Commerz

bank AG, with which the Fresenius Group maintains business

relationships under customary conditions. In 2014, the

Fresenius Group paid € 1.1 million in total to Commerzbank AG

for cap ital market financing and for carrying out the share

split. Dr. Gerhard Rupprecht was a member of the Supervisory

Boards of Fresenius Management SE and Fresenius SE &

Co. KGaA and of the supervisory board of Allianz France SA. In

2014, the Fresenius Group paid € 11.6 million for insurance

premiums to Allianz under customary conditions.

Consultancy or other service relationships between mem

bers of the Supervisory Board and the Company existed with

regard to Dr. Dieter Schenk, Deputy Chairman of the Super

visory Board of Fresenius Management SE. Dr. Schenk is a

partner in the law firm Noerr llp. The entities of the interna

tionally acting law firm Noerr provided legal advice to the

Fresenius Group in 2014. In 2014, the Fresenius Group paid

or processed for payment in December a total of about € 1.8

million to the law firm Noerr (2013: € 1.5 million). This cor

responds to 1% of the total amount paid by the Fresenius

Group for services and legal advice in 2014 (2013: 1%). Not

included in the amount paid or processed for payment are such

payments made in 2014 that had already been processed for

payment in 2013 and have therefore already been reported for

the 2013 fiscal year. Of the total amount for fiscal year 2014,

about € 0.7 million were attributable to services for Group com

panies not related to the business segment Fresenius Medi

cal Care. The services rendered for Group companies of the

business segment Fresenius Medical Care require a sepa

rate approval by the Supervisory Boards of Fresenius Medical

Care Management AG and Fresenius Medical Care AG & Co.

KGaA. The Supervisory Board of Fresenius Management SE

has examined the mandate closely, and has approved this

mandate. Dr. Schenk did not take part in the voting. The ap

proval was made on the basis of a written submission to the

Supervisory Board, which listed all individual mandates and

their corresponding individual invoices. In 2014, the invoices

were paid after the Supervisory Board gave its approval. The

Supervisory Board of Fresenius SE & Co. KGaA dealt with the

amounts for legal services paid to the law firm Noerr in rela

tion to the amounts paid to other law firms.

Further consulting or service contracts between Super

visory Board members and the Company existed in the case

of prof. Dr. h. c. Roland Berger, who is both a member of

the Supervisory Boards of Fresenius Management SE and of

Fresenius SE & Co. KGaA, and is at the same time a partner

in the management consultancy firm Roland Berger Strategy

Consultants Holding GmbH. The Fresenius Group paid € 3.1

million to Roland Berger Group companies affiliated with this

company for services rendered in 2014 (2013: € 2.9 million).

The Super visory Boards of Fresenius Management SE and

Fresenius SE & Co. KGaA closely examined this mandate in the

2013 fiscal year. Both Supervisory Boards approved this

mandate. prof. Dr. h. c. Berger abstained from each voting. The

respective approvals were made on the basis of a written

submission to the Supervisory Board and prior to the payment

of the invoices for the services. Work on this mandate given

in the 2013 fiscal year was completed in the fiscal year 2014.

The payments mentioned in the above section “legal

relationships with members of the corporate bodies” are net

amounts. In addition, vAT was paid.

There are no other consulting or service contracts – neither

directly nor indirectly – between Supervisory Board members

and the Company.

Fresenius has disclosed the information on related parties

in its 2014 quarterly reports and on page 179 of the Annual

Report.

DiSCloSUreS on DireCtorS’ DealinGS anD ShareholDinGS in 2014Members of the Management and Supervisory Boards of

the general partner, members of the Supervisory Board of

Fresenius SE & Co. KGaA, other executive officers, and per

sons closely related to them are required, pursuant to Section

15a of the German Securities Trading Act (WpHG), to dis

close purchases and sales of Fresenius SE & Co. KGaA’s shares

Corporate G

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and financial instruments based on them (directors’ deal

ings). Directors’ dealings in 2014 are disclosed in the table

above.

pursuant to number 6.3 of the Code, ownership of shares

of the Company and financial instruments based on them

must be disclosed by Management Board and Supervisory

Board members if more than 1% of the shares issued by the

Company are held either directly or indirectly. None of the

Management or Supervisory Board members of the general

partner or of the Supervisory Board of Fresenius SE & Co.

KGaA directly or indirectly holds more than 1% of the shares

issued by Fresenius or any related financial instruments.

The members of the Management and Supervisory Boards

of Fresenius Management SE and the members of the Super

visory Board of Fresenius SE & Co. KGaA together hold 0.90%

of the shares of Fresenius SE & Co. KGaA outstanding as of

December 31, 2014, in the form of shares or related financial

instruments and stock options under the Fresenius SE & Co.

KGaA stock option plans. 0.43% are held by members of the

Management Board of Fresenius Management SE, 0.47%

by members of the Supervisory Board of Fresenius Manage

ment SE, and 0.46% by members of the Supervisory Board

of Fresenius SE & Co. KGaA. Due to the fact that some persons

are members of both Supervisory Boards, the amount of

shares or related financial instruments and stock options held

by the Boards of Fresenius SE & Co. KGaA and Fresenius

Management SE in total is smaller than the cumulative hold

ings of the three Boards as reported herein.

There were no notifications that the shareholdings of

members of the Management and Supervisory Boards had

reached, exceeded, or fallen below the reporting thresholds

stipulated in the German Securities Trading Act.

tranSparenCY anD CoMMUniCationFresenius adheres to all recommendations under number 6 of

the Code. Transparency is guaranteed by continuous com

munication with the public. In that way we are able to validate

and deepen the trust given to us. Of particular importance

to us is the equal treatment of all recipients. To ensure that

all market participants receive the same information at the

same time, we post all important publications on our website

at www.fresenius.com. We report in detail on investor rela

tions activities on page 10 of the Annual Report.

FinanCial aCCoUntinG anD reportinGFresenius prepares its consolidated financial statements in

accordance with the united States Generally Accepted

Accounting principles (u.S. GAAp). Fresenius, as a publicly

traded company based in a member country of the European

union, is required to prepare and publish its consolidated

financial statements in accord ance with International Finan

cial Reporting Standards (IFRS) pursuant to Section 315a of

the German Commercial Code (HGB). Our largest subsidiary,

Fresenius Medical Care, prepares its financial statements in

accordance with u.S. GAAp. We therefore publish our consol

idated financial statements in accordance with u.S. GAAp

and our statutory consolidated financial statements in accor

dance with IFRS. This enables us to disclose our financial

results to all our shareholders in a comparable and transpar

ent manner.

DIRECTORS’ DEAlINGS

2014 Name position Quantity price in € 1Total volume

in € Type of transaction

September 8 Dr. u. M. Schneider Management Board 66,580 19.21 1,278,836.48 Stock option exercise 2

September 2 Dr. u. M. Schneider Management Board 65,000 18.60 1,208,896.59 Stock option exercise 2

August 5 R. Berger Supervisory Board 101,703 37.01 3,764,170.41 Sale

June 20 Dr. u. M. Schneider Management Board 12,900 75.77 977,423.51 Stock option exercise 2

June 6 Dr. u. M. Schneider Management Board 12,900 76.55 987,499.30 Stock option exercise 2

June 3 S. Sturm Management Board 25,800 76.23 1,966,828.75 Stock option exercise 2

May 28 S. Sturm Management Board 21,930 69.45 1,523,047.01 Stock option exercise 2

May 27 Dr. u. M. Schneider Management Board 12,900 75.77 977,416.69 Stock option exercise 2

May 21 Dr. u. M. Schneider Management Board 12,900 74.84 965,423.90 Stock option exercise 2

March 18 Dr. G. Krick Supervisory Board 1 100,000.00 100,000.00purchase of Convertible Bond

of Fresenius SE & Co. KGaA

February 28 Dr. K. Schneider Supervisory Board 3 5,000 111.05 555,230.00 Sale

1 price rounded to two decimals2 Exercise of stock options on Fresenius shares of the stock option plan and sale of the shares (cash settlement)3 Fresenius Management SE

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Compensation RepoRtThe compensation report summarizes the main elements of the

compensation system for the members of the Management

Board of Fresenius Management SE as the general partner of

Fresenius SE & Co. KGaA, and in this regard notably explains

the amounts and structure of the compensation paid to the

Management Board as well as the principles for determining

the compensation of the Supervisory Board and the amounts

of the compensation. The compensation report is part of the

Management Report of the annual financial statements and

the annual consolidated financial statements of Fresenius SE &

Co. KGaA. The compensation report is prepared on the basis

of the recommendations of the German Corporate Governance

Code as well as under consideration of the declaration of

conformity of Fresenius SE & Co. KGaA of December 2014, and

also includes the disclosures as required pursuant to the

applicable statutory regulations, notably in accordance with

the German Commercial Code.

Compensation of the manaGement BoaRd

The entire Supervisory Board of Fresenius Management SE

is responsible for determining the compensation of the Man-

agement Board. The Supervisory Board is assisted in this

task by a personnel committee. In the fiscal year 2014, the

acting personnel committee was composed of Dr. Gerd Krick,

Dr. Dieter Schenk, and Dr. Karl Schneider.

The objective of the compensation system is to enable the

members of the Management Board to participate reason-

ably in the sustainable development of the Company’s business

and to reward them based on their duties and performance

as well as their successes in managing the Company’s eco-

nomic and financial position giving due regard to the peer

environment.

The compensation of the Management Board is, as a

whole, performance-based and was composed of three ele-

ments in the fiscal year 2014:

▶ non-performance-based compensation (fixed compensa-

tion and fringe benefits)

▶ short-term performance-based compensation (one-year

variable compensation)

▶ components with long-term incentive effects (several-

year variable compensation comprising stock options,

share-based compensation with cash settlement (phan-

tom stocks), and postponed payments of the one-year


In addition, there are pension commitments for the seven

members of the Management Board.

The design of the individual components is based on the

following criteria:

The fixed compensation was paid in 12 monthly install-

ments in the fiscal year 2014. Mr. Rice Powell was paid a part

of his fixed compensation from Fresenius Medical Care North

America in 24 installments. Moreover, the members of the

Management Board received additional benefits consisting

mainly of insurance premiums, the private use of a company

car, special payments such as rent supplements and reim-

bursement of certain other charges, tuition fees, as well as con-

tributions to pension and health insurance.

The performance-based compensation will also be granted

for the fiscal year 2014 as a short-term cash component (one-

year variable compensation) and as a compensation component

with long-term incentive effects (stock options, share-based

compensation with cash settlement (phantom stocks), and

postponed payments of the one-year variable compensation).

The amount of the one-year variable compensation in each

case is dependent on certain target parameters oriented on the

net income attributable to Fresenius SE & Co. KGaA and / or

to the relevant business segments being achieved. In the case

of the members of the Management Board with functional

responsibility for the entire Group – such members being

Dr. Schneider, Mr. Sturm, and Dr. Götz – the amount of the one-

year variable compensation is based in its entirety on the

respective net income attributable to Fresenius SE & Co. KGaA

(after deduction of noncontrolling interest). For Mr. Henriksson

and Dr. De Meo, approximately half of the amount of the

one-year variable compensation depends on the development

of the net income attributable to Fresenius SE & Co. KGaA

and for the remainder on the development of the net income of

the business segment (in each case after deduction of non-

controlling interest) for which the respective member of the

Management Board is responsible. Approximately half of the

amount of the one-year variable compensation of Dr. Wastler

is oriented on the net income attributable to Fresenius SE &

Co. KGaA (after deduction of non controlling interest) as well

as on the net income before tax and extraordinary income /

expenditures of the VAMED group. Mr. Rice Powell receives

his compensation exclusively from Fresenius Medical Care.

Furthermore, the Supervisory Board may grant members of

the Management Board a discretionary bonus for extraordi-

nary performance.

For the fiscal year 2014, the Supervisory Board of

Fresenius Medical Care Management AG has granted such

discretionary bonus to Mr. Rice Powell in the total amount

of € 376 thousand.

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For the fiscal years 2014 and 2013, the amount of cash payment of the Management Board of the general partner of

Fresenius SE & Co. KGaA consisted of the following:

Non-performance-basedcompensation

Performance-basedcompensation

Cash compensation(without long-term

incentive components)

Salary Other 2 Bonus

€ in thousands 2014 2013 2014 2013 2014 2013 2014 2013

Dr. Ulf M. Schneider 990 990 92 64 1,454 1,402 2,536 2,456

Dr. Francesco De Meo 550 550 19 19 1,015 998 1,584 1,567

Dr. Jürgen Götz 415 415 35 34 697 690 1,147 1,139

Mats Henriksson 550 550 175 217 943 956 1,668 1,723

Rice Powell 1 941 941 151 169 737 3 373 1,829 1,483

Stephan Sturm 550 550 41 40 929 921 1,520 1,511

Dr. Ernst Wastler 470 470 37 35 671 660 1,178 1,165

total 4,466 4,466 550 578 6,446 6,000 11,462 11,044

1 Mr. Rice Powell received his compensation only from Fresenius Medical Care, of which Fresenius SE & Co. KGaA held around 31% of the total subscribed capital. As member of the Management Board of Fresenius Management SE, his compensation has to be included in the compensation report of the Fresenius Group.

2 Includes insurance premiums, private use of a company car, contributions to pension and health insurance, as well as other benefits3 Includes a discretionary bonus for fiscal year 2014 granted to Mr. Rice Powell in the amount of € 376 thousand

In the fiscal year 2014, the one-year variable compensation,

excluding the payment to Mr. Rice Powell, amounted to € 5,709

thousand. This equals 95% of the total one-year variable

compensation of € 5,980 thousand. The remaining part in an

amount of € 271 thousand was converted into a component

based on a multi-year assessment and the payment was post-

poned by two years.

To ensure that the overall system of compensation of the

members of the Management Board is oriented towards

long-term and sustained corporate development, the compen-

sation system provides that the share of long-term variable

compensation components is at least equal in its amount to

half of the total variable compensation components granted

to the respective member of the Management Board. As a

means of ensuring this minimum ratio in favor of the compen-

sation components oriented towards the long term, it is

expressly provided that the Supervisory Board may determine

that the one-year variable compensation to be paid as a rule

annually is converted (pro rata) into a variable compensation

com ponent based on a multi-year assessment, in order to

also take account of any negative developments within the

assessment period. This is done in such a way that the matu-

rity of the yearly one-year variable compensation earned

on a variable basis is postponed at the discretion of the Super-

visory Board, either on a pro rata basis or in its entirety, by

two years. At the same time, it is ensured that any payment is

made to the member of the Management Board after expiration

of such multi-year period only if (i) no subsequent adjustment

of the decisive (i. e., adjusted by extraordinary effects) net

income attributable to Fresenius SE & Co. KGaA (after deduc-

tion of noncontrolling interest) beyond an amount equal to

a tolerance range of 10% is made, and (ii) the amount of net

income attributable to Fresenius SE & Co. KGaA (adjusted

for extraordinary effects) in the two relevant sub sequent years

is not substantially less than the net income attributable to

Fresenius SE & Co. KGaA (adjusted by extra ordinary effects,

after deduction of noncontrolling interest) of the respective

preceding fiscal years. In the event of the aforementioned con-

ditions for payment being missed only to a minor and / or

partial extent, the Supervisory Board may resolve on a corre-

sponding pro rata payment of the converted portion of the

one-year variable compensation. No interest is payable on the

converted one-year variable compensation claim from the

time when it first arises until the time of its effective payment.

In this way, the one-year variable compensation can be con-

verted pro rata or in its entirety into a genuine variable com-

pensation component on a multi-year assessment basis, which

also participates in any negative developments during the

relevant assessment period.

In the fiscal year 2014, benefits under LTIP 2013 of

Fresenius SE & Co. KGaA, and for Mr. Rice Powell, benefits

under LTIP 2011 of Fresenius Medical Care AG & Co. KGaA,

were granted as another component with long-term incentive

effect. Such benefits consist, on the one hand, of share-

based compensation with cash settlement (phantom stocks)

and, on the other hand, of stock options on the basis of

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the Stock Option Plan 2013 of Fresenius SE & Co. KGaA and,

for Mr. Rice Powell, on the basis of the Stock Option Plan

2011 of Fresenius Medical Care AG & Co. KGaA. The LTIP 2013

is available both for members of the Management Board

and other executives. In accordance with the division of pow-

ers under stock corporation law, grants to members of the

Management Board are made by the Supervisory Board of

Fresenius Management SE, and grants to other executives

are made by the Management Board. The number of stock

options and phantom stocks for Management Board mem-

bers to be granted is determined by the Supervisory Board

at the Supervisory Board’s own discretion, provided that gen-

erally all Management Board members receive the same

amount of stock options and phantom stocks, with the excep-

tion of the Chairman of the Management Board who receives

double the respective amount of stock options and phan-

tom stocks. At the time of the grant, the participants in LTIP

2013 may elect whether they wish to receive stock options

and phantom stocks in a ratio of 75 : 25, or in a ratio of 50 : 50.

Exercise of the stock options and the phantom stocks

granted under LTIP 2013 of Fresenius SE & Co. KGaA is subject

to several conditions, such as expiry of a four-year waiting

period, observance of vesting periods, achievement of the

specified performance target, and continuance of the service

or employment relationship. The vested stock options can

be exercised within a period of four years. The vested phantom

stocks are settled on March 1 of the year following the end

of the waiting period.

The amount of the cash settlement pursuant to the Phan-

tom Stock Plan 2013 is based on the volume-weighted average

market price of the share of Fresenius SE & Co. KGaA during

the three months preceding the exercise date.

The respective performance target has been reached if

the adjusted consolidated net income of the Company (net

income attributable to the shareholders of the Company) has

increased by a minimum of 8% per year in com parison to

the previous year within the waiting period, after adjustment

for foreign currency effects. The performance target has also

been achieved if the average annual growth rate of the adjusted

consolidated net income of the Company during the four-year

waiting period is at least 8%, adjusted for foreign-currency

effects. If, with respect to one or more of the four reference

periods within the waiting period, neither the adjusted con-

solidated net income of the Company has increased by a mini-

mum of 8% per year in comparison to the previous year,

after adjustment for foreign currency effects, nor the average

annual growth rate of the adjusted consolidated net income

of the Company during the four-year waiting period is at

least 8%, adjusted for foreign-currency effects, the respective

granted stock options and phantom stocks are forfeited on

a pro-rata basis according to the proportion of the perfor-

mance target that has not been achieved within the waiting

period, i. e., by one fourth, by two fourths, by three fourths,

or completely.

The principles of LTIP 2013 of Fresenius SE & Co. KGaA

and of LTIP 2011 of Fresenius Medical Care AG & Co. KGaA

are described in more detail in note 33 of the notes of the

Fresenius Group, Stock options.

The previous share-based compensation component with

cash settlement (performance shares) has been combined

with the current share-based compensation component with

cash settlement (phantom stocks). The members of the Man-

agement Board, with the exception of Mr. Rice Powell, were

granted an entitlement to further share-based compensation

with cash settlement (further phantom stocks, previously per-

formance shares) in the equivalent value of € 100 thousand

per Management Board member in the fiscal year 2014. With

regard to the performance target and waiting period, the

same conditions that pertain to the phantom stocks granted

under LTIP 2013 apply to them.

For the fiscal years 2014 and 2013, the number and value

of stock options issued, the value of the share-based com-

pensation with cash settlement (phantom stocks), and the

value of the postponed performance-based compensation is

shown in the following table. For the statements on stock

options, the stock split 2014 was reflected with a ratio of 1 : 3.

The stated values of the stock options granted to mem-

bers of the Management Board in the fiscal year 2014 corre-

spond to their fair value at the time of grant, namely a value

of € 8.28 (2013: € 9.08) per stock option of Fresenius SE & Co.

KGaA and € 9.01 (2013: € 8.92) per stock option of Fresenius

Medical Care AG & Co. KGaA. The exercise price of the granted

stock options of Fresenius SE & Co. KGaA was € 36.92 (2013:

€ 33.10).

The fair value of the phantom stocks granted to members

of the Management Board in the fiscal year 2014 corre-

sponds to a value at the time of grant of € 34.18 (2014: € 32.65)

per phantom stock of Fresenius SE & Co. KGaA and € 46.26

(2013: € 44.93) per phantom stock of Fresenius Medical Care

AG & Co. KGaA.

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At the end of the fiscal year 2014, subsequent to the stock

split, the members of the Management Board held a total of

2,345,904 (2013: 2,460,474) stock options and convertible

bonds (together referred to as stock options) of Fresenius SE &

Co. KGaA and 407,737 (2013: 361,050) of Fresenius Medical

Care AG & Co. KGaA.

LONG-TERM INCENTIVE COMPONENTS

Stock options 1

Postponed payment of the

one-year variable compensation

Share-based compensation with

cash settlement (phantom stocks) Total

Number Value, € in thousands Value, € in thousands Value, € in thousands Value, € in thousands

2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Dr. Ulf M. Schneider 90,000 90,000 745 817 0 0 897 864 1,642 1,681

Dr. Francesco De Meo 45,000 45,000 373 409 143 108 499 482 1,015 999

Dr. Jürgen Götz 45,000 45,000 373 409 0 0 499 482 872 891

Mats Henriksson 45,000 45,000 373 409 71 65 499 482 943 956

Rice Powell 74,700 74,700 673 666 0 0 351 358 1,024 1,024

Stephan Sturm 45,000 45,000 373 409 57 30 499 482 929 921

Dr. Ernst Wastler 45,000 45,000 373 409 0 0 499 482 872 891

total 389,700 389,700 3,283 3,528 271 203 3,743 3,632 7,297 7,363

1 Stock options that were granted in 2014 and 2013 under the Fresenius SE & Co. KGaA stock option plan. Mr. Rice Powell received stock options under the Fresenius Medical Care stock option plan.

The development and the status of the stock options of the Management Board in the fiscal year 2014

are shown in the following table:

Dr. Ulf M.Schneider

Dr. FrancescoDe Meo

Dr. JürgenGötz

MatsHenriksson

RicePowell 1

StephanSturm

Dr. ErnstWastler total 2

Options outstanding on January 1, 2014

number 887,220 340,854 215,280 175,800 361,050 509,400 331,920 2,460,474

average exercise price in € 21.16 23.55 26.64 25.39 45.47 20.17 23.67 22.40

Options granted during fiscal year

number 90,000 45,000 45,000 45,000 74,700 45,000 45,000 315,000

exercise price in € 36.92 36.92 36.92 36.92 49.93 36.92 36.92 36.92

Options exercised during fiscal year

number 286,380 0 0 0 0 143,190 0 429,570

average exercise price in € 14.89 12.30 14.03

average stock price in € 37.22 36.67 37.04

Options forfeited during fiscal year

number 0 0 0 0 28,013 0 0 0

average exercise price in € 52.48

Options outstanding on December 31, 2014

number 690,840 385,854 260,280 220,800 407,737 411,210 376,920 2,345,904


average remaining life in years 4.5 4.3 5.1 5.1 4.4 4.2 4.3 4.5

range of exercise prices in €

17.83 to 36.92

17.83 to 36.92

23.76 to 36.92

17.83 to 36.92

31.97 to 57.30

17.83 to 36.92

17.83 to 36.92

17.83 to 36.92

Exercisable options on December 31, 2014

number 340,560 210,714 85,140 82,800 174,300 236,070 201,780 1,157,064


1 Mr. Rice Powell holds stock options under the Fresenius Medical Care stock option plan.2 Only stock options of Fresenius SE & Co. KGaA, excluding stock options of Mr. Rice Powell

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The following table shows the total compensation of the Management Board of the general partner of

Fresenius SE & Co. KGaA for the years 2014 and 2013:

Cash compensation (without long-term

incentive components)Long-term

incentive components

Total compensation (including long-term

incentive components)

€ in thousands 2014 2013 2014 2013 2014 2013

Dr. Ulf M. Schneider 2,536 2,456 1,642 1,681 4,178 4,137

Dr. Francesco De Meo 1,584 1,567 1,015 999 2,599 2,566

Dr. Jürgen Götz 1,147 1,139 872 891 2,019 2,030

Mats Henriksson 1,668 1,723 943 956 2,611 2,679

Rice Powell 1,829 1,483 1,024 1,024 2,853 2,507

Stephan Sturm 1,520 1,511 929 921 2,449 2,432

Dr. Ernst Wastler 1,178 1,165 872 891 2,050 2,056

total 11,462 11,044 7,297 7,363 18,759 18,407

The stock options and the entitlement to a share-based com-

pensation (phantom stocks) can be exercised only after the

expiry of minimum terms (vesting periods). Their value is

recognized over the vesting period as expense in the respec-

tive fiscal year. The expenses attributable to the fiscal years

2014 and 2013 are stated in the following table.

ExPENSES FOR LONG-TERM INCENTIVE COMPONENTS

Stock options

Share-based compensation with cash settlement

(phantom stocks)Total expenses for

share-based compensation

€ in thousands 2014 2013 2014 2013 2014 2013

Dr. Ulf M. Schneider 864 902 518 94 1,382 996

Dr. Francesco De Meo 432 451 334 86 766 537

Dr. Jürgen Götz 432 451 334 86 766 537

Mats Henriksson 298 239 228 11 526 250

Rice Powell 176 325 435 441 611 766

Stephan Sturm 432 451 334 86 766 537

Dr. Ernst Wastler 432 451 334 86 766 537

total 3,066 3,270 2,517 890 5,583 4,160

The short-term performance-based compensation is limited

in its amount. As regards stock options and phantom stocks,

there are contractually agreed limitation possibilities. This

makes it possible to adequately take account in particular of

those extraordinary developments that are not in any relevant

proportion to the performance of the Management Board.

Under the compensation system, the amount of the fixed

and the total compensation of the members of the Manage-

ment Board was, and will be, assessed giving particular regard

to the relevant comparison values of other DAx companies

and similar companies of comparable size and performance

from the relevant industrial sector.

Commitments to memBeRs of the

manaGement BoaRd in the event of the

teRmination of theiR appointment

There are individual contractual pension commitments for

the Management Board members Dr. Ulf M. Schneider,

Dr. Francesco De Meo, Dr. Jürgen Götz, and Mr. Stephan Sturm

based on their serv ice agreements with the general partner

of Fresenius SE & Co. KGaA. The Management Board member

Dr. Ernst Wastler has a pension commitment of VAMED AG,

Vienna. The Management Board member Mats Henriksson has

a pension commitment of Fresenius Kabi AG. The Manage-

ment Board member Mr. Rice Powell has received an individ-

ual contractual pension commitment from Fresenius Medical

Care Management AG. Furthermore, he has acquired non-

forfeitable entitlements from participating in pension plans

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for employees of Fresenius Medical Care North America, and

during the fiscal year 2014, he participated in the U.S.-based

401(k) Savings Plan. This plan generally enables employees

in the United States to invest part of their gross income into

retirement plans. With regard to these pension commitments,

the Fresenius Group had pension obligations of € 24,381

thousand as of December 31, 2014 (2013: € 15,963 thou-

sand). The additions to pension liability in the fiscal year

2014 amounted to € 8,418 thousand (2013: € 3,277 thou-

sand).

The pension commitments are as follows:

€ in thousandsAs of

January 1, 2014 Additionsas of

december 31, 2014

Dr. Ulf M. Schneider 2,812 1,482 4,294

Dr. Francesco De Meo 1,195 717 1,912

Dr. Jürgen Götz 1,090 592 1,682

Mats Henriksson 1,752 1,841 3,593

Rice Powell 4,493 2,161 6,654

Stephan Sturm 1,640 837 2,477

Dr. Ernst Wastler 2,981 788 3,769

total 15,963 8,418 24,381

Each of the pension commitments provides for a pension and

survivor benefit, depending on the amount of the most recent

fixed compensation, from the 63rd year of life (or 65th year

for Mr. Rice Powell), or, in the case of termination because of

professional or occupational incapacity, from the time of end-

ing active work.

The pension’s starting percentage of 30% of the last fixed

compensation increases with every full year of service as a

Management Board member by 1.5 percentage points, 45%

being the attainable maximum.

Current pensions increase according to legal requirements

(Section 16 of the German law to improve company pension

plans, BetrAVG).

Thirty percent of the gross amount of any post-retirement

income from an occupation of the Management Board mem-

ber is offset against the pension for professional or occupa-

tional incapacity.

In the event of the death of one of the Management Board

members, the widow receives a pension equivalent to 60%

of the pension entitlement accruing at the time of death. In

addition, own legitimate children, respectively, in the individ-

ual case, own children of the deceased Management Board

member’s wife who have been adopted by the deceased Man-

agement Board member, receive an orphan’s pension equiv-

alent to 20% of the pension entitlement accruing at the time

of death until completion of their vocational training, but at

the most until the age of 25 years. However, all orphans’ pen-

sions and the widow’s pension are capped at an aggregate

90% of the Management Board member’s pension entitlement.

If a Management Board member’s service as a member

of the Management Board of Fresenius Management SE ends

before the age of 63 years (or 65 years for Mr. Rice Powell)

for reasons other than professional or occupational incapacity,

the rights to the said pension ben efits vest, but the pension

payable upon the occurrence of a pensionable event is reduced

pro rata according to the actual length of service as a Man-

agement Board member compared to the potential length of

service until the age of 63 years (or 65 years for Mr. Rice

Powell).

The pension commitment for Dr. Ernst Wastler provides

for a normal pension, an early retirement pension, a profes-

sional incapacity pension, and a widow’s and orphan’s pen-

sion. The normal pension is payable at the earliest at the age

of 60 years and the early retirement pension at the earliest

at the age of 55 years. The pension benefits are equivalent to

1.2% per year of service based on the last fixed compensa-

tion, with a cap of 40%. The widow’s pension (60%) and the

orphan’s pension (20% each) are capped in aggregate at

not more than Dr. Ernst Wastler’s pension entitlement at the

time of death. Pensions, retirement, and other benefits from

third parties are set off against the pension benefit.

The Management Board member Mr. Mats Henriksson

has solely a pension commitment of Fresenius Kabi AG from

the period of his previous service. This pension commitment

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remained unaffected by the service agreement with Fresenius

Management SE, beginning on January 1, 2013. It is based

on the pension policy of the Fresenius companies from Janu-

ary 1, 1988, and provides for retirement, incapacity, and wid-

ow’s and orphan’s pensions. It does not set forth any deduction

of other income or pension benefits. The widow’s pension

amounts to 60% of the incapacity or retirement pension to be

granted at the time of death; the orphan’s pension amounts

to 10% (half-orphans) or 20% (orphans) of the incapacity or

retirement pension to be granted at the time of death. The

total entitlements of widows and orphans are limited to 100%

of Mr. Mats Henriksson’s pension entitlements.

A post-employment non-competition covenant was agreed

upon for all Management Board members. If such a cove-

nant becomes applicable, the Management Board members

receive a waiting allowance that is generally equivalent to

half of the respective annual fixed compensation for each year

of respective application of the non-competition covenant,

up to a maximum of two years.

The service agreements of the Management Board mem-

bers do not contain any explicit provision for the event of a

change of control.

misCellaneous

All members of the Management Board have received individ-

ual contractual commitments for the continuation of their

compensation in the event of sickness for a maximum period

of 12 months, provided that, after six months of sickness-

related absence, any insurance benefits that may be paid are

to be deducted from such continued compensation. In the

event of death of a member of the Management Board, the

surviving dependents will receive three monthly payments

after the month during which the death occurred, at maxi-

mum, however, until the expiry of the respective employment

agreement.

During the fiscal year 2014, no loans or advance pay-

ment on future compensation components were granted to

any member of the Management Board of Fresenius Man-

agement SE.

Fresenius SE & Co. KGaA undertook to indemnify the Manage-

ment Board members, to the legally permitted extent, against

any claim that may be asserted against them due to their ser-

vice for the Company and its affiliated Group com panies to the

extent that such claims exceed their liability under German

law. To cover such obligations, the Company purchased a

directors & officers insurance, the deductible complying with

the requirements of stock corporation law. The indemnifica-

tion covers the period during which the respective member of

the Management Board holds office as well as any claim in

this connection after termination of the service on the Manage-

ment Board.

Based on pension commitments to former members of the

Management Board, € 1,049 thousand were paid in the fiscal

year 2014 (2013: € 1,064 thousand) and € 494 thousand (2013:

€ 550 thousand) were paid to Dr. Ben Lipps as a result of a

consultancy agreement entered into with Fresenius Medical

Care Management AG. The benefit obligation for these per-

sons amounted to € 18,465 thousand (2013: € 17,389 thou-

sand).

taBles displayinG the value of Benefits GRanted and alloCationsThe German Corporate Governance Code provides that com-

pensation reports for fiscal years beginning after Decem-

ber 31, 2013, shall include information for each member of the

Management Board on the benefits granted and allocations

made, as well as on the pension expenses for the year under

report. The model tables provided in the appendix to the

German Corporate Governance Code shall be used to present

the information.

The following tables include information on the value of

benefits granted as well as on the allocations made. They

adhere to the structure and, to a large extent, the standards

of the model tables of the German Corporate Governance

Code:

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Benefits grantedValue € in thousands

dr. ulf m. schneiderChairman of the Management Board

Board member since May 28, 2003

dr. franceso de meoCEO Fresenius Helios

Board member since January 1, 2008

dr. Jürgen GötzChief Legal and Compliance Officer,

and Labor Relations DirectorBoard member since July 1, 2007

mats henrikssonCEO Fresenius Kabi


Rice powellCEO Fresenius Medical Care


stephan sturmChief Financial Officer


dr. ernst WastlerCEO Fresenius Vamed


20142014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013

non-performance-based compensation

Fixed compensation 990 990 990 990 550 550 550 550 415 415 415 415 550 550 550 550 941 941 941 941 550 550 550 550 470 470 470 470

Fringe benefits 92 92 92 64 19 19 19 19 35 35 35 34 175 175 175 175 151 151 151 169 41 41 41 40 37 37 37 37

total non-performance-based compensation 1,082 0 0 1,054 569 0 0 569 450 0 0 449 725 0 0 767 1,092 1,092 1,092 1,110 591 0 0 590 507 0 0 505

performance-based compensation

One-year variable compensation 2 1,454 1,200 1,750 1,402 1,015 750 1,250 998 697 250 750 690 943 750 1,250 956 1,929 3 212 2,239 3 1,553 929 850 1,150 921 671 350 750 660

Multi-year variable compensation / components with long-term incentive effect

Postponed one-year variable compensation 0 0 n / a 143 0 n / a 108 0 0 n / a 71 0 n / a 65 57 0 n / a 30 0 0 n / a

Stock Option Plan 2013 (part of LTIP 2013) (5-year term) 745 0 n / a 817 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409

Phantom stocks (part of LTIP 2013) (5-year term) 797 0 n / a 764 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382

Further phantom stocks 100 100 100 100 100 100 100 100 100 100 100 100

Components with long-term incentive effect 1,642 0 n / a 1,681 1,015 0 n / a 999 872 0 n / a 891 943 0 n / a 956 1,024 1 71 n / a 1,024 929 0 n / a 921 872 0 n / a 891

total non-performance-based and performance-based compensation 4,178 2,282 n / a 4,137 2,599 1,319 n / a 2,566 2,019 700 n / a 2,030 2,611 1,475 n / a 2,679 4,045 1,375 n / a 3,687 2,449 1,441 n / a 2,432 2,050 857 n / a 2,056

Service cost 234 234 234 201 201 201 201 176 136 136 136 118 120 120 120 84 429 429 429 405 182 182 182 159 92 92 92 83

value of benefits granted 4,412 2,516 n / a 4,338 2,800 1,520 n / a 2,742 2,155 836 n / a 2,148 2,731 1,595 n / a 2,763 4,474 1,804 n / a 4,092 2,631 1,623 n / a 2,591 2,142 949 n / a 2,139

1 Mr. Rice Powell was granted stock options and phantom stocks from the stock option program of Fresenius Medical Care as follows: in 2014: € 120 thousand from the Share Based Award – New Incentive Bonus Plan 2010, € 673 thousand from the Long Term Incentive Program 2011 – Stock Option Plan 2011; in 2013: € 124 thousand from the Share Based Award – New Incentive Bonus Plan 2010, € 666 thousand from the Long Term Incentive Program 2011 – Stock Option Plan and € 234 thousand from the Long Term Incentive Program 2011 – Phantom Stock Plan 2011.

2 For the one-year variable compensation, there are no target values or comparable values. The one-year variable compensation is determined on the basis of bonus curves applicable for several years. For this reason, the allocation from the one-year variable remuneration is stated.

3 Includes a discretionary bonus for fiscal year 2014 granted to Mr. Rice Powell in the amount of € 376 thousand

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Benefits grantedValue € in thousands















20142014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013 2014

2014min.

2014max. 2013


Fixed compensation 990 990 990 990 550 550 550 550 415 415 415 415 550 550 550 550 941 941 941 941 550 550 550 550 470 470 470 470

Fringe benefits 92 92 92 64 19 19 19 19 35 35 35 34 175 175 175 175 151 151 151 169 41 41 41 40 37 37 37 37

total non-performance-based compensation 1,082 0 0 1,054 569 0 0 569 450 0 0 449 725 0 0 767 1,092 1,092 1,092 1,110 591 0 0 590 507 0 0 505


One-year variable compensation 2 1,454 1,200 1,750 1,402 1,015 750 1,250 998 697 250 750 690 943 750 1,250 956 1,929 3 212 2,239 3 1,553 929 850 1,150 921 671 350 750 660


Postponed one-year variable compensation 0 0 n / a 143 0 n / a 108 0 0 n / a 71 0 n / a 65 57 0 n / a 30 0 0 n / a

Stock Option Plan 2013 (part of LTIP 2013) (5-year term) 745 0 n / a 817 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409 373 0 n / a 409

Phantom stocks (part of LTIP 2013) (5-year term) 797 0 n / a 764 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382 399 0 n / a 382

Further phantom stocks 100 100 100 100 100 100 100 100 100 100 100 100

Components with long-term incentive effect 1,642 0 n / a 1,681 1,015 0 n / a 999 872 0 n / a 891 943 0 n / a 956 1,024 1 71 n / a 1,024 929 0 n / a 921 872 0 n / a 891

total non-performance-based and performance-based compensation 4,178 2,282 n / a 4,137 2,599 1,319 n / a 2,566 2,019 700 n / a 2,030 2,611 1,475 n / a 2,679 4,045 1,375 n / a 3,687 2,449 1,441 n / a 2,432 2,050 857 n / a 2,056

Service cost 234 234 234 201 201 201 201 176 136 136 136 118 120 120 120 84 429 429 429 405 182 182 182 159 92 92 92 83

value of benefits granted 4,412 2,516 n / a 4,338 2,800 1,520 n / a 2,742 2,155 836 n / a 2,148 2,731 1,595 n / a 2,763 4,474 1,804 n / a 4,092 2,631 1,623 n / a 2,591 2,142 949 n / a 2,139

1 Mr. Rice Powell was granted stock options and phantom stocks from the stock option program of Fresenius Medical Care as follows: in 2014: € 120 thousand from the Share Based Award – New Incentive Bonus Plan 2010, € 673 thousand from the Long Term Incentive Program 2011 – Stock Option Plan 2011; in 2013: € 124 thousand from the Share Based Award – New Incentive Bonus Plan 2010, € 666 thousand from the Long Term Incentive Program 2011 – Stock Option Plan and € 234 thousand from the Long Term Incentive Program 2011 – Phantom Stock Plan 2011.

2 For the one-year variable compensation, there are no target values or comparable values. The one-year variable compensation is determined on the basis of bonus curves applicable for several years. For this reason, the allocation from the one-year variable remuneration is stated.


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Allocations Value € in thousands















2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013


Fixed compensation 990 990 550 550 415 415 550 550 941 941 550 550 470 470

Fringe benefits 92 64 19 19 35 34 175 217 151 169 41 40 37 35

total non-performance-based compensation 1,082 1,054 569 569 450 449 725 767 1,092 1,110 591 590 507 505


One-year variable compensation 2 1,454 1,402 1,015 998 697 690 943 956 737 2 373 929 921 671 660


Postponed one-year variable compensation 0 174 29 131 0 98 0 0 0 0 79 208 0 95

Stock Option Plan 2003 (5-year term)

Issue 2005 3,008 443

Issue 2006 1,503 805 1,523 650

Issue 2007 2,488 56 288


Issue 2008 1,246 1,019 1,086 1,164 1,084

Issue 2009 3,907 1,558 1,625 871 1,967 1,771

Issue 2010 1,405

total multi-year variable com-pensation / components with long-term incentive effect 6,395 2,749 29 3,438 0 4,404 0 871 399 1 1,172 3,569 4,172 0 3,948

Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0

total non-performance-based and performance-based compensation 8,931 5,205 1,613 5,005 1,147 5,543 1,668 2,594 2,228 2,655 5,089 5,683 1,178 5,113

Service cost 234 201 201 176 136 118 120 84 429 405 182 159 92 83

allocation 9,165 5,406 1,814 5,181 1,283 5,661 1,788 2,678 2,657 3,060 5,271 5,842 1,270 5,196

1 Mr. Rice Powell had this allocation from stock options from the Fresenius Medical Care Stock Option Program: in 2014: € 399 thousand from the Share Based Award – New Incentive Bonus Plan 2010 issue 2010; in 2013: € 317 thousand from the Share Based Award – New Incentive Bonus Plan 2009 issue 2009 and € 855 thousand from the stock option plan 2006, issue 2007.


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Allocations Value € in thousands















2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013


Fixed compensation 990 990 550 550 415 415 550 550 941 941 550 550 470 470

Fringe benefits 92 64 19 19 35 34 175 217 151 169 41 40 37 35

total non-performance-based compensation 1,082 1,054 569 569 450 449 725 767 1,092 1,110 591 590 507 505


One-year variable compensation 2 1,454 1,402 1,015 998 697 690 943 956 737 2 373 929 921 671 660


Postponed one-year variable compensation 0 174 29 131 0 98 0 0 0 0 79 208 0 95


Issue 2005 3,008 443

Issue 2006 1,503 805 1,523 650

Issue 2007 2,488 56 288


Issue 2008 1,246 1,019 1,086 1,164 1,084

Issue 2009 3,907 1,558 1,625 871 1,967 1,771

Issue 2010 1,405

total multi-year variable com-pensation / components with long-term incentive effect 6,395 2,749 29 3,438 0 4,404 0 871 399 1 1,172 3,569 4,172 0 3,948

Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0

total non-performance-based and performance-based compensation 8,931 5,205 1,613 5,005 1,147 5,543 1,668 2,594 2,228 2,655 5,089 5,683 1,178 5,113

Service cost 234 201 201 176 136 118 120 84 429 405 182 159 92 83

allocation 9,165 5,406 1,814 5,181 1,283 5,661 1,788 2,678 2,657 3,060 5,271 5,842 1,270 5,196

1 Mr. Rice Powell had this allocation from stock options from the Fresenius Medical Care Stock Option Program: in 2014: € 399 thousand from the Share Based Award – New Incentive Bonus Plan 2010 issue 2010; in 2013: € 317 thousand from the Share Based Award – New Incentive Bonus Plan 2009 issue 2009 and € 855 thousand from the stock option plan 2006, issue 2007.


Corporate G

overnance


Compensation of the supeRvisoRy BoaRd

The compensation of the Supervisory Board is determined

by the Annual General Meeting and is subject to the provi-

sions contained in Section 13 of the articles of association of

Fresenius SE & Co. KGaA. Each member of the Supervisory

Board shall receive a fixed compensation of € 13 thousand.

The members of the Audit Committee of Fresenius SE &

Co. KGaA receive an additional € 10 thousand each and the

Chairman of the committee a further € 10 thousand. For each

full fiscal year, the remuneration increases by 10% for each

percentage point that three times the dividend (or the dividend

up to registration of the capital increase from company’s

funds on August 1, 2014) paid on each ordinary share for that

year (gross dividend according to the resolution of the Annual

General Meeting) exceeds 3.6% of the amount equal to the

subscribed capital divided by the number of non-par value

shares; residual amounts are interpolated. The Chairman re-

ceives twice this amount and the deputies to the Chairman

one and a half times the amount of a Supervisory Board mem-

ber. All members of the Supervisory Board receive appro-

priate compensation for costs of travel and accommodation

incurred in connection with their duties as members of the

Supervisory Board. Fresenius SE & Co. KGaA provides to the

members of the Supervisory Board insurance coverage in

an adequate amount (relating to their function) with an excess

equal to those of the Management Board.

If a member of the Supervisory Board of Fresenius SE & Co.

KGaA is, at the same time, a member of the Supervisory

Board of the general partner Fresenius Management SE and

receives remuneration for his service on the Supervisory

Board for Fresenius Management SE, the remuneration shall

be reduced by half. The same applies with respect to the

additional part of the remuneration for the Chairman or one of

his deputies if they are, at the same time, the Chairman or one

of his deputies on the Supervisory Board of Fresenius Man-

agement SE. If the deputy of the Chairman of the Super visory

Board of Fresenius SE & Co. KGaA is, at the same time, the

Chairman of the Supervisory Board of Fresenius Manage-

ment SE, he shall not receive remuneration for his service as

Deputy Chairman of the Supervisory Board of Fresenius SE &

Co. KGaA. According to Section 7 of the articles of associa-

tion of Fresenius SE & Co. KGaA, the remuneration of the Super-

visory Board of Fresenius Management SE was charged to

Fresenius SE & Co. KGaA.

For the years 2014 and 2013, the compensation for the

members of the Supervisory Boards of Fresenius SE & Co.

KGaA and Fresenius Management SE, including compensa-

tion for committee services, was as follows:

Cor

pora

te G

over

nanc

e


Fixed compensationCompensation for

committee servicesVariable

compensationTotal

compensation







€ in thousands 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013

Dr. Gerd Krick 13 13 13 13 10 10 20 20 167 158 167 158 390 372

Dr. Dieter Schenk 0 0 19 19 0 0 10 10 0 0 250 237 279 266

Niko Stumpfögger 19 19 0 0 0 0 0 0 250 237 0 0 269 256

Prof. Dr. med. D. Michael Albrecht 13 13 0 0 0 0 0 0 167 158 0 0 180 171

Prof. Dr. h. c. Roland Berger 7 7 6 6 20 20 0 0 83 79 84 79 200 191

Dario Ilossi 13 13 0 0 0 0 0 0 167 158 0 0 180 171

Konrad Kölbl 13 13 0 0 10 10 0 0 167 158 0 0 190 181

Klaus-Peter Müller 7 7 6 6 0 0 0 0 83 79 84 79 180 171

Dieter Reuß 13 13 0 0 0 0 0 0 167 158 0 0 180 171

Gerhard Roggemann 13 13 0 0 10 10 0 0 167 158 0 0 190 181

Dr. Gerhard Rupprecht († August 8, 2014) 8 13 4 6 0 0 0 0 101 158 50 79 163 256

Dr. Karl Schneider 0 0 13 13 0 0 10 10 0 0 167 158 190 181

Stefan Schubert 13 13 0 0 0 0 0 0 167 158 0 0 180 171

Rainer Stein 13 13 0 0 10 10 0 0 167 158 0 0 190 181

total 145 150 61 63 60 60 40 40 1,853 1,817 802 790 2,961 2,920

diReCtoRs & offiCeRs insuRanCe Fresenius SE & Co. KGaA has concluded a consequential loss

liability insurance policy (D & O insurance), on an excess

amount basis, for the members of the Management Board and

the Super visory Board of the general partner of Fresenius SE &

Co. KGaA and for the Supervisory Board of Fresenius SE &

Co. KGaA as well as for all representative bodies of affiliates

in Germany and elsewhere. The D & O policy applies through-

out the world and runs until the end of June 2015. The policy

covers the legal defense costs of a member of a representative

body when a claim is made and, where relevant, any dam-

ages to be paid that are covered by the policy.

Business S

egments

Business Segments36

Fresenius medical care. In 2014, Fresenius Medical Care again achieved strong organic sales growth of 5%. We have significantly expanded our portfolio with acquisitions in the field of Care Coordination.

Fresenius medical care is the world’s leading provider of

dialysis products and services. When the kidney function of

patients with this disease fails, dialysis takes over the vital

task of cleansing the blood from toxins and surplus water. in

dialysis, two treatment methods are distinguished: hemodial

ysis (Hd) and peritoneal dialysis (Pd). With Hd, the patient’s

blood is cleansed with a dialyzer, or artificial kidney, a pro

cess that is controlled by a hemodialysis machine. in the case

of Pd, the patient’s peritoneum is used as a filter to cleanse

the blood.

as a vertically integrated company, Fresenius medical care

offers services and dialysis products along the entire dialysis

value chain in over 120 countries. Fresenius medical care

has a worldwide network of 40 production sites. We further

expanded our leading market position in 2014: We treated

286,312 patients at 3,361 dialysis clinics worldwide and the

number of treatments increased by 6% to 42.7 million.

BUSINESS DEVELOPMENTFresenius medical care increased sales by 8% to us$ 15,832

million in 2014 (2013: us$ 14,610 million). Organic sales

growth was 5%. acquisitions contributed 5%, divestitures

had no effect on sales. adverse currency effects reduced

sales by 2%.

eBiT was us$ 2,255 million (2013: us$ 2,256 million). The

eBiT margin was 14.2% (2013: 15.4%). The margin decrease

is mainly due to the rebasing of medicare’s reimbursement

rate in the united states.

net income 1 was us$ 1,045 million (2013: us$ 1,110

million).

NOrTh AMErIcA

north america remained Fresenius medical care’s largest

business region. in 2014, sales grew by 9% to us$ 10,500 mil

lion compared to us$ 9,606 million in 2013. Organic sales

growth was 5%. acquisitions contributed 5%, divestitures

had no effect on sales.

1 net income attributable to shareholders of Fresenius medical care aG & co. KGaa

sales BY reGiOn

us$ in millions 2014 2013 change

currency translation

effects

% of total Fresenius

medical caresales

north america 10,500 9,606 9% 0% 66%

europe / middle east / africa 3,072 3,023 2% 2% 20%

asiaPacific 1,357 1,104 23% 3% 9%

latin america 836 843 1% 17% 5%

corporate 67 34 97% 0% 0%

Total 15,832 14,610 8% 2% 100%

Bus

ines

s S

egm

ents

Business Segments Fresenius medical care 37

eBiT was us$ 1,643 million (2013: us$ 1,623 million). The

eBiT margin was 15.6% (2013: 16.9%). in 2014, the average

revenue per treatment in the united states was us$ 368 com

pared to us$ 359 in 2013. The average cost per treatment in

the united states increased from us$ 293 in 2013 to us$ 303

in 2014.

INTErNATIONAL

in 2014, the international segment, comprising the business

regions Europe / Middle East / Africa, Asia-Pacific, and Latin

America, achieved excellent results. sales in the interna

tional segment increased by 6% to us$ 5,265 million (2013:

us$ 4,970 million). Organic sales growth was 6%. acquisi

tions con tributed 6%, divestitures reduced sales growth by

1%, while currency translation had a negative effect of 5%.

eBiT in the international segment was us$ 970 million (2013:

us$ 897 million). The eBiT margin was 18.4% (2013: 18.1%).

AcQUISITIONSin 2014, Fresenius medical care expanded its care coordina

tion activities. care coordination is an expansion of the com

pany’s renal services for its patients and includes, e. g. vascular

care and the coordination of outpatient and inpatient treat

ments, as well as intensive care by specialized doctors. With

the acquisition of a majority stake of sound inpatient Physi

cians and cogent Healthcare, as well as the acquisition of med

spring urgent care centers and national cardiovascular Part

ners, the company made important steps in 2014.

TrEATMENT QUALITyin 2014, physicians and dialysis clinical staff again offered

our patients the highestquality treatment based on clinical

quality parameters as shown in the table below. Please see

page 54 of the management report for further details on

treatment quality.

Please refer to page 80 f. of the management report for the

2015 financial outlook of Fresenius medical care. For further

information, please see Fresenius medical care’s annual report

2014 or visit the website at www.freseniusmedicalcare.com.

north america

europe / middle east /

africa latin america asiaPacificTotal2014

change2014 / 2013

dialysis clinics (december 31) 2,162 635 247 317 3,361 3%

dialysis patients (december 31) 176,203 52,848 31,983 25,278 286,312 6%

Treatments (in millions) 26.61 8.05 4.82 3.27 42.74 6%

Fresenius medical care BY reGiOn

us$ in millions 2014 2013 change

north america

Health care services 1 9,655 8,772 10%

dialysis products 845 834 1%

Total 10,500 9,606 9%

international


dialysis products 2,670 2,612 2%

Total 5,265 4,970 6%

Worldwide


dialysis products 2 3,582 3,480 3%

Total 15,832 14,610 8%

1 sales from dialysis services and care coordination2 including sales generated by corporate functions of us$ 67 million in 2014 and

us$ 34 million in 2013

sales BY seGmenT

QualiTY ParameTers OF Fresenius medical care PaTienTs 1

usa emea asiaPacific

2014 2013 2014 2013 2014 2013

Kt / V ≥ 1.2 96% 97% 95% 95% 97% 96%

Hemoglobin = 10 – 12 g / dl 74% 75% 76% 73% 60% 59%

Hemoglobin = 10 – 13 g / dl 80% 81% 77% 75% 69% 68%

albumin ≥ 3.5 g / dl 2 83% 86% 92% 90% 91% 91%

Phosphate ≤ 5.5 mg / dl 2 64% 66% 79% 76% 70% 70%

Hospitalization days 9.1 9.4 9.4 9.4 4.3 4.2

1 data refer to the last quarter.2 international standard Bcr crm470

Business S

egments

Business Segments38

Fresenius KaBi. Our business grew organically in all regions and product segments. We achieved organic sales growth of 4% and an EBIT margin of 17% in line with our guidance. In the emerging markets, China and Latin America showed particularly strong growth.

Fresenius Kabi specializes in the therapy and care of chroni

cally and critically ill people. The portfolio includes iV drugs,

i. e., intravenously administered generic anesthetics, anti

infectives, analgesics, and drugs for the treatment of oncolog

ical and other critical diseases. another product segment is

clinical nutrition. in this segment, we are one of the few com

panies worldwide that offer both parenteral and enteral nutri

tion products. The infusion therapy portfolio includes infu

sion solutions and blood volume substitutes.

in the medical devices / transfusion technology segment,

we offer infusion and nutrition pumps as well as consum

ables for the administration of our pharmaceuticals and clinical

nutrition products. moreover, our portfolio includes prod

ucts used in the collection and processing of whole blood and

blood components, as well as in transfusion medicine.

BUSINESS DEVELOPMENTsales increased by 3% to € 5,146 million in 2014. Of this, 4%

was attributable to organic sales growth and 1% to acquisi

tions. adverse currency effects reduced sales by 2%. This was

due to the weakening of several currencies against the euro,

mainly in argentina, Brazil, canada, and south africa. divesti

tures had no impact on sales growth.

in europe, we achieved organic sales growth of 3%. sales

were affected in particular by restrictions on the use of blood

volume substitutes imposed by the european medicines

agency (ema) in 2013. in north america, performance was

impacted by the easing of iV drug shortages in the united

states. nevertheless, we achieved organic sales growth of

1% in this region. Fresenius Kabi had strong overall growth

in emerging markets. We achieved organic sales growth of

18% in latin america. in asiaPacific, china’s organic sales

growth of 10% to € 549 million is worth special mention.

€ in millions 2014 2013 change

currency translation

effects

% of total Fresenius Kabi

sales

europe 2,102 2,053 2% 1% 41%

north america 1,531 1,522 1% 0% 30%

asiaPacific 987 927 6% 2% 19%

latin america / africa 526 494 6% 14% 10%

Total 5,146 4,996 3% 2% 100%

sales BY reGiOn

Bus

ines

s s

egm

ents

Business Segments Fresenius Kabi 39

sales by product segment were as follows:

eBiT 1 decreased to € 873 million. it was particularly impacted

by lower sales of Hes blood volume substitutes and the

easing of iV drug shortages in the united states. currency

translation had a negative effect of 2%.

AcQUISITIONSin Brazil, Fresenius Kabi acquired the pharmaceutical company

novafarma indústria Farmacêutica ltda. novafarma offers the

Brazilian hospital market a comprehensive range of generic

iV drugs. This transaction is part of Fresenius Kabi’s strategy

to expand its market presence and product portfolio in fast

growing emerging markets. Fresenius Kabi also acquired two

companies in ecuador: medisumi, a pharmaceutical whole

saler, and labfarm, an iV antibiotic manufacturer. This allowed

Fresenius Kabi to further expand its market position and

product portfolio in ecuador.

€ in millions 2014 2013Organic

sales growth

iV drugs 1,813 1,733 4%

clinical nutrition 1,384 1,332 7%

infusion therapy 977 980 3%

medical devices / Transfusion technology 972 951 3%

Total 5,146 4,996 4%


europe 345 357 3%

north america 557 547 2%

asiaPacific / latin america / africa 239 235 2%

administrative and corporate r & d expenses - 268 213 26%

EBIT 1 873 926 6%

EBIT 1 margin 17.0% 18.5%

net income 2 468 487 4%

PrODUcT SEgMENTSin the generic IV drugs segment, we expanded our product

portfolio to additional regional markets and are continuously

working on offering our products in packagings that are espe

cially userfriendly and safe. We now offer Propofol in a pre

filled syringe for immediate injection, and have successfully

launched this new product in a number of european countries.

in clinical nutrition, we expanded the market presence

of our threechamber bag for parenteral nutrition. For exam

ple, we successfully introduced smofKabiven in some coun

tries in latin america. We received Fda approval for our three

chamber bags Kabiven and Perikabiven, making us the first

provider of threechamber bag products for parenteral nutrition

in the u.s. The threechamber bag contains all the macro

nutrients such as amino acids, glucose, and lipids in three sep

arate chambers. immediately before infusion, all nutrients

are mixed thoroughly within the bag simply by opening indi

vidual chambers. This reduces the risk of contamination, saves

time when preparing the infusion, and considerably increases

shelf life.

in the infusion therapy product segment, we received

temporary import approval from the Fda, the u.s. health

authority, to help alleviate shortages in the supply of infusion

products.

in the medical devices / transfusion technology segment,

we continue to expand our range of products. For example,

in 2014, we began the market introduction of a syringe pump

specially designed to provide low doses of enteral nutrition

solutions.

Please refer to page 80 f. of the management report for the

2015 financial outlook of Fresenius Kabi. For further informa

tion, please see Fresenius Kabi’s website at www.fresenius

kabi.com.

1 Before integration costs for Fenwal Holdings, inc. (2014: € 50 million; 2013: € 54 million)2 net income attributable to the shareholders of Fresenius Kabi aG; before integration costs for Fenwal Holdings, inc. (2014: € 33 million; 2013: € 40 million)

Business S

egments

Business Segments40

Fresenius HeliOs. The year 2014 was marked by the successful completion of the acquisition of 41 hospitals from RhönKlinikum AG. We achieved the sales target of ~ € 1.8 billion for these hospitals, and recorded first EBIT margin increases. With organic sales growth of 4%, the established business also developed excellently.

at the end of 2014, the HeliOs Group operated 110 hospitals:

86 acute care hospitals, including 7 maximum care hospi

tals in BerlinBuch, duisburg, erfurt, Krefeld, schwerin, Wies

baden, and Wuppertal, as well as 24 postacute care clinics.

in addition, it also operated 47 outpatient clinics, 5 outpatient

postacute care centers, 11 prevention centers, and 15 nurs

ing homes. The Group has more than 34,000 beds and treats

over 4.2 million patients – including more than 1.2 million

inpatients – each year.

BUSINESS DEVELOPMENTin 2014, Fresenius Helios increased sales by 55% to € 5,244

million (2013: € 3,393 million). The hospitals acquired from

rhönKlinikum aG contributed € 1,791 million to sales. Organic

sales growth was 4%. divestitures reduced sales by 2%.

The acute care hospitals accounted for 90% of sales

(2013: 88%), while the postacute care hospitals accounted

for 7% (2013: 9%). 3% was attributable to other revenues

(2013: 3%).

Fresenius Helios increased eBiT 1 by 42% to € 553 million

(2013: € 390 million). The eBiT margin 1 was 10.5% (2013:

11.5%). The decrease is due to the firsttime consolidation of

the hospitals acquired from rhönKlinikum aG. net income 2

increased by 45% to € 400 million (2013: € 275 million).

sales of the established hospitals (consolidation > 1 year)

grew by 4% to € 3,453 million (2013 3: € 3,306 million). eBiT 1

increased by 5% to € 395 million (2013 3: € 376 million).

The eBiT margin 1 was 11.4% (2013 3: 11.4%).

The acquired hospitals achieved eBiT 1 of € 158 million

with an eBiT margin 1 of 8.8%.

We have established a sixyear development plan for

acute care and postacute care hospitals acquired. The devel

opment plan provides for the eBiT margin to improve by

two percentage points each year. The current status is shown

in the table beside.


sales 5,244 3,393 55%

thereof acute care 4,736 2,996 58%

thereof postacute care 344 293 17%

eBiT 1 553 390 42%

eBiT margin 1 in % 10.5 11.5

net income 2 400 275 45%

1 2014 before special items2 net income attributable to HeliOs Kliniken GmbH, 2014 before special items

1 2014 before special items2 net income attributable to HeliOs Kliniken GmbH, 2014 before special items3 2013 adjusted for divestitures

Bus

ines

s s

egm

ents

Business Segments Fresenius Helios 41

AcQUISITIONSin 2014, Fresenius Helios successfully completed the acqui

sition of 41 hospitals from rhönKlinikum aG and is now the

largest hospital operator in Germany, present in nearly the

whole of the country.

as of January 1, 2014, Fresenius Helios consolidated

approximately 70% of the acquired business, and as of

march 1, 2014, another 20%. The acquisition of HsK dr. Horst

schmidt Kliniken in Wiesbaden was concluded on schedule

on June 30, 2014. With 1,027 beds, this is the seventh maxi

mum care hospital in the HeliOs Group. HeliOs also took

over the 265bed hospital in cuxhaven from rhönKlinikum aG

on July 31, 2014.

The integration of the hospitals is proceeding according

to plan. in 2014, they were incorporated into the expanded

regional HeliOs structure and the brand integration was

largely implemented. Purchasing as well as various services

were bundled and iT integration completed.

hOSPITAL ADMISSIONS AND TrEATMENTSdue to the firsttime consolidation of the acquired hospitals –

but also due to the broad range of services and high treat

ment quality of HeliOs – the number of inpatients and out

patients treated increased in 2014:

2014 2013 change

inpatient and semi inpatient admissions 1,207,195 807,178 50%

acute care hospitals 1,148,473 754,703 52%

Postacute care clinics 58,722 52,475 12%

Outpatient admissions 3,362,292 2,373,781 42%

Key structural data and performance indicators developed

as follows:

2014 2013 change

acute care hospitals 86 51 69%

Beds 29,068 18,885 54%

length of stay (days) 6.6 6.6 0%

Postacute care clinics 24 23 4%

Beds 5,120 4,617 11%

length of stay (days) 26.5 26.5 0%

Occupancy 83% 83%

INVESTMENTSFresenius Helios invested a total of € 1,185 million (2013:

€ 2,443 million). Of this amount, € 824 million accounted for

acquisitions and € 361 million primarily for new buildings and

the modernization of the hospitals in northeim, schleswig,

and Krefeld. Own investments were € 266 million, about 5%

of sales.

Please refer to page 80 f. of the management report for

the 2015 financial outlook of Fresenius Helios. For further

information, please see Fresenius Helios’ website at

www.helioskliniken.de.


investments 1,185 2,443 51%

Own investments (property, plant and equipment) 266 172 55%

subsidies 1 (property, plant and equipment) 95 86 10%

acquisitions 824 2,185 62%

1 Total of purposerelated public investment subsidies according to section 9 of the Hospital Funding act (KHG)

years in portfolio

< 1 1 2 3 4 1 5 6 > 6 Total 1

number of clinics – 12 3 40 – 6 49 110

sales in million € – 401 160 1,799 – 205 2,515 5,080

Target

eBiT margin in % 2.0 4.0 6.0 8.0 10.0 12.0 12.0 – 15.0

eBiT in million € – 16.0 9.6 143.9 – 24.6 301.8 495.9

reported

eBiT margin in % – 8.1 4.8 7.9 – 8.8 13.5 10.6

eBiT in million € – 32.4 7.7 141.2 – 18.0 338.3 537.6

number of clinics > target – 8 1 19 – 2 22 52

number of clinics < target – 4 2 21 – 4 27 58

reported figures according to iFrs

1 includes all hospitals acquired from rhönKlinikum aG; eBiT includes € 29 million integration costs allocated to individual hospitals

clinic deVelOPmenT Plan acuTe and POsTacuTe care HOsPiTals 2014

Business S

egments

Business Segments42

Fresenius Vamed. In a challenging market environment, Fresenius Vamed again achieved sales and EBIT growth. The order backlog increased significantly and order intake reached an alltime high. This is an excellent basis for future growth.

Fresenius Vamed manages projects and provides services

for hospitals and other health care facilities worldwide. Our

portfolio ranges along the entire value chain: from project

development, planning, and turnkey construction, via mainte

nance and technical management, to total operational man

agement, as illustrated in the chart on page 43. This range of

competencies enables us to support complex health care

facilities efficiently and successfully at each stage of their life

cycle. as a specialist provider of a full spectrum of services

and being active worldwide, Vamed holds a unique position.

We have successfully completed more than 710 projects in

77 countries.

BUSINESS DEVELOPMENTSales in 2014 increased to € 1,042 million (2013: € 1,020 mil

lion). Organic growth of 0% was mainly influenced by proj

ect delays in russia and ukraine. acquisitions contributed 2%

to sales growth.

The table shows the sales development by activity:

EBIT increased by 7% to € 59 million (2013: € 55 million). The

eBiT margin was 5.7% (2013: 5.4%). in the project busi

ness, eBiT was € 27 million (2013: € 27 million), and in the

service business increased to € 32 million (2013: € 28 mil

lion). net income 1 improved to € 41 million, an increase of

11% (2013: € 37 million).

Our business has a low capital intensity. This is reflected

in the share of property, plant and equipment in the bal

ance sheet of 19% and the pretax return on equity of 20.4%

(2013: 19.8%).

€ in millions 2014 2013 change% of total

sales

Project business 558 583 4% 54%

service business 484 437 11% 46%

1 net income attributable to Vamed aG


% of total Fresenius

Vamed sales

europe 807 770 5% 78%

africa 117 117 0% 11%

asiaPacific 85 84 1% 8%

latin america 33 49 33% 3%

Total 1,042 1,020 2% 100%

sales BY reGiOn

Bus

ines

s s

egm

ents

Business Segments Fresenius Vamed 43

Vamed Value cHain

Project Development Planning Project Management and construction

Services ▶ Technical▶ commercial▶ infrastructural

Operational Management▶ Technical management▶ Total Operational

management

Project Business service Business

PrOJEcT BUSINESSThe project business comprises the consulting, project devel

opment, planning, turnkey construction, and financing man

agement of projects. Vamed responds flexibly to the local

needs of clients, providing customtailored solutions all from

one source. We also carry out projects in cooperation with

partners. among public clients there is growing interest in

publicprivate partnership (PPP) models. Vamed is a pioneer

in this market segment. up to the end of 2014, 23 of these

models had been or are currently being implemented.

Germany is one of our key countries within Europe. Thus,

Vamed was awarded the contract for the modernization of

the university Hospital of schleswigHolstein, in a consortium

with the construction company Bam. The project is due to

be completed in 2021. in addition, the consortium will also

provide longterm operation and maintenance of the hospital

building. With a total volume of around € 1.7 billion, the project

is the largest PPP model in the German health care system.

in Berlin, Vamed was commissioned to renovate the 21storey

inpatient building at the charité Hospital, and to build new

intensive care units, operating rooms, and an emergency de

partment. in Bosnia, Vamed obtained a major contract for

the modernization and expansion of a university hospital. in

Africa, Vamed built five turnkey polyclinics in Ghana. Ten

more will follow by 2017. We also carried out projects in Gabon

and nigeria. in Latin America, we began building and equip

ping the Point Fortin Hospital in Trinidad and Tobago. in

china, we started to supply medical equipment for the 1,800

bed hospital of Beijing university. in Papua New guinea,

Vamed secured the contract to build a diagnostic and surgi

cal center.

SErVIcE BUSINESSVamed offers a full range of facility management services for

health care facilities. modular in design, our service offering

encompasses every aspect of technical, commercial, and infra

structural facility management. This ranges from building

and equipment maintenance, medical technology manage

ment, and technical management through to the operational

management. Our integrated port folio of services is aimed

at the optimal operation of a health care facility.

Vamed was responsible for the total operational manage

ment of 51 health care facilities on four continents with

approximately 6,700 beds in 2014. Worldwide, Vamed pro

vides technical operation services to more than 510 hospi

tals with about 130,000 beds.

in Austria, Vamed continued its partnership with Vienna’s

General Hospital and university Hospital (aKH), one of the

largest hospitals in europe. in addition, our eleven facilities

make us the largest private rehabilitation provider in austria.

in Switzerland, we operate two wellknown rehabilitation

facilities. in germany, a consortium led by Vamed has been

responsible for all technical and infrastructural services at

Berlin’s charité Hospital since 2006. in gabon, Vamed is

responsible for the overall management of seven regional hos

pitals and for the technical management of three hospitals

in libreville.

VAMED VITALITy WOrLDVamed Vitality World’s thermal spa and wellness resorts have

succeeded in bridging the gap between preventive medicine

and health care tourism. With approximately 2.5 million visi

tors annually in eight thermal spas and wellness resorts,

we are the market leader in austria. With the aquaworld resort

in Budapest, Vamed took over the operational management

outside austria for the first time.

Please refer to pages 80 f. of the management report for the

2015 financial outlook of Fresenius Vamed. For further infor

mation on Vamed, please see Fresenius Vamed’s website at

www.vamed.com.


Order intake 840 744 13%

Order backlog (december 31) 1,398 1,139 23%

Order inTaKe and Order BacKlOG FOr PrOJecTs

Managem

ent Report

44 Management Report

45 Fundamental information about the Group


46 Important markets and competitive position

46 Legal and economic factors

46 Management and control

47 Capital, shareholders, articles of association


49 Corporate performance criteria


52 Employees

53 Procurement


55 Responsibility, environmental management, sustainability



59 The dialysis market

60 The market for generic IV drugs, clinical nutrition,

infusion therapy, and medical devices /

transfusion technology

61 The German hospital market

62 The market for projects and services for hospitals and

other health care facilities


62 The Management Board’s assessment of the effect

of general economic developments and those in the

health care sector for Fresenius

62 The Management Board’s assessment of the

business results and significant factors affecting

operating performance

63 Comparison of the actual business results with

the forecasts

64 Results of operations, financial position, assets and liabilities

64 Results of operations

68 Financial position

73 Assets and liabilities

75 Corporate rating


76 Overall assessment of the business situation

76 Outlook

76 General and mid-term outlook

78 Future markets

78 Health care sector and markets


80 Sales and earnings by business segment

81 Financing

81 Investments

82 Procurement


82 Planned changes in human resources and the social area

82 Dividend



83 Risk management

84 Risk areas


TABLE OF CONTENTS MANAGEMENT REPORT

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Management Report Fundamental information about the Group 45

FundaMental inFoRMation about

the gRoup

the gRoup’s business ModelFresenius is a global health care group in the legal form of

an SE & Co. KGaA (a partnership limited by shares). We offer

products and services for dialysis, hospitals, and outpatient

medical care. In addition, Fresenius focuses on hospital oper-

ations. We also manage projects and provide services for

hospitals and other health care facilities worldwide.

The operating business comprises four business segments,

all of which are legally independent entities managed by the

operating parent company Fresenius SE & Co. KGaA. The busi-

ness segments have a regional and decentralized structure.

▶ Fresenius Medical Care offers services and products for

patients with chronic kidney failure. As of December 31,

2014, Fresenius Medical Care treated 286,312 patients at

3,361 dialysis clinics. Dialyzers, dialysis machines, and

renal pharmaceuticals are among the most important

product lines. In addition, Fresenius Medical Care offers

dialysis-related services, among others in the field of Care

Coordination.

▶ Fresenius Kabi specializes in intra venously adminis-

tered generic drugs (IV drugs), clinical nutrition, and infu-

sion therapies. The company is also a supplier of medi-

cal devices and products of transfusion technology. The

company sells its products mainly to hospitals.

▶ Fresenius helios is the largest hospital operator in Ger-

many. At the end of 2014, Fresenius Helios operated a

total of 110 hospitals with more than 34,000 beds in Ger-

many. In addition to 86 acute care hospitals, including

seven maximum care hospitals in Berlin-Buch, Duisburg,

Erfurt, Krefeld, Schwerin, Wiesbaden, and Wuppertal, the

HELIOS Group has 24 post-acute care clinics.

▶ Fresenius Vamed manages projects and provides services

for hospitals and other health care facilities worldwide.

The portfolio ranges along the entire value chain – from

project development, planning, and turnkey construction,

via maintenance, and technical management, to total

operational management.

▶ The segment Corporate / other comprises the holding

activities of Fresenius SE & Co. KGaA and the IT service

provider Fresenius Netcare, which operates mainly for

Group companies. In addition, Corporate / Other includes

the consolidation measures conducted among the busi-

ness segments.

GROuP STRuCTuRE


31% 100% 100% 77%

Fresenius Medical Care

Fresenius Kabi

Fresenius Helios

Fresenius Vamed

MANAGEMENT REPORT. 2014 was a successful year for Fresenius. We fully met our guidance, exceeding € 23.2 billion in sales and achieving € 1.1 billion in net income. Operating cash flow margin was 11.1%.

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Fresenius has an international sales network and maintains

approximately 90 production sites. Large production sites

are located in the united States, China, Japan, Germany, and

Sweden. Production plants are also located in other Euro-

pean countries and in Latin America, Asia-Pacific, and South

Africa.

iMpoRtant MaRKets and CoMpetitiVe

position

Fresenius operates in about 80 countries through its subsid-

iaries. The main markets are North America and Europe with

40% and 44% of sales, respectively.

Fresenius Medical Care holds the leading position world-

wide in dialysis care as it serves about 11% of all dialysis

patients, as well as in dialysis products, with a market share

of about 35%. Fresenius Kabi holds leading market positions

in Europe and has significant market shares in the growth

markets of Asia-Pacific and Latin America. In the united States,

Fresenius Kabi is one of the leading suppliers of generic

IV drugs. Fresenius helios is the largest hospital operator in

Germany. Fresenius Vamed is one of the world’s leading

companies in its field.

legal and eConoMiC FaCtoRs

Overall, the legal and economic factors for the Fresenius Group

were largely unchanged. The life-saving and life-sustaining

products and therapies that the Group offers are of intrinsic

importance for people worldwide. Therefore, our markets are

fundamentally stable and relatively independent of economic

cycles. For detailed information on our markets, please see

pages 59 ff.

Furthermore, the diversification across four business

segments and our global reach provide additional stability

for the Group.

The statement of income and the balance sheet can be

influenced by currency translation effects as a result of

exchange rate fluctuations, especially in the rate between

the u.S. dollar and the euro. In 2014, the average annual

exchange rate between the u.S. dollar and the euro of 1.33

was unchanged compared to 2013, and had therefore no effect

on the income statement. The changed spot rate of 1.21 as

of December 31, 2014 – compared to 1.38 as of December 31,

2013 – had a significant effect on the balance sheet.

There were no legal aspects that significantly affected

business performance in 2014.

ManageMent and ContRol

In the legal form of a KGaA, the Company’s corporate bodies

are the General Meeting, the Supervisory Board, and the

general partner, Fresenius Management SE. Fresenius Man-

agement SE is wholly owned by Else Kröner-Fresenius-

Stiftung. The KGaA has a two-tier management system –

management and control are strictly separated.

The general partner, represented by its Management

board, conducts the business and represents the Company in

dealings with third parties. The Management Board has seven

members. According to the Management Board’s rules of

procedure, each member is accountable for his or her own area

of responsibility. However, the members have joint responsi-

bility for the management of the Group. In addition to the

Supervisory Board of Fresenius SE & Co. KGaA, Fresenius Man-

agement SE has its own Supervisory Board. The Manage-

ment Board is required to report to the Supervisory Board of

Fresenius Management SE regularly, in particular on its

corporate policy and strategies, business profitability, current

operations, and any other matters that could be of signifi-

cance for the Company’s profitability and liquidity. The Super-

visory Board of Fresenius Management SE also advises and

supervises the Management Board in its management of

the Company. It is prohibited from managing the Company

directly. However, the Management Board’s rules of proce-

dure require it to obtain the approval of the Supervisory Board

of Fresenius Management SE for specific activities.

The members of the Management Board are appointed

and dismissed by the Supervisory Board of Fresenius Manage-

ment SE. Appointment and dismissal is in accordance with

Article 39 of the SE Regulation. The articles of association of

Fresenius Management SE also provide that deputy members

of the Management Board may be appointed.

The supervisory board of Fresenius se & Co. Kgaa

advises and supervises the management of the Company’s

business by the general partner, reviews the annual financial

statements and the consolidated financial statements, and

performs the other functions assigned to it by law and the

Company’s articles of association. It is involved in corporate

planning and strategy, and in all matters of fundamental

importance for the Company. The Supervisory Board of

Fresenius SE & Co. KGaA has six shareholder representatives

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and six employee representatives. A Nomination Committee

of the Supervisory Board of Fresenius SE & Co. KGaA has

been instituted for election proposals for the shareholder

representatives. Its activities are aligned with the provisions

of law and the Corporate Governance Code. The share-

holder representatives are elected by the general Meeting

of Fresenius se & Co. Kgaa. The European works council

elects the employee representatives to the Super visory Board

of Fresenius SE & Co. KGaA.

The Supervisory Board must meet at least twice per calen-

dar half-year. The Supervisory Board of Fresenius SE & Co.

KGaA has two permanent committees: the Audit Committee,

consisting of five members, and the Nomination Committee,

consisting of three members. The members of the committees

are listed on page 191 of this Annual Report. The Company’s

annual corporate governance declaration describes the proce-

dures of the Supervisory Board’s committees. The declara-

tion can be found on pages 11 to 35 of the Annual Report and

on the website www.fresenius.com.

The description of both the compensation system and

individual amounts paid to the Management Board and Super-

visory Board of Fresenius Management SE, and the Super-

visory Board of Fresenius SE & Co. KGaA, are included in the

Compensation Report on pages 23 to 35 of the annual report.

The Compensation Report is part of the Group’s Manage-

ment Report.

Capital, shaReholdeRs, aRtiCles oF

assoCiation

The subscribed capital of Fresenius SE & Co. KGaA amounted

to 541,532,600 ordinary shares as of December 31, 2014

(December 31, 2013: 179,694,829). On May 16, 2014, the

Annual General Meeting approved the issuance of new shares

(stock split) through the conversion of capital reserves from

company funds. In accordance with the proposed stock split,

various authorizations were adjusted accordingly. These res-

olutions were recorded in the commercial register on August

1, 2014. The subscribed capital and the number of shares

were tripled. Every shareholder has received two additional

shares for each share held (three-for-one stock split). The

stock exchange listing was converted on August 4, 2014.

The shares of Fresenius SE & Co. KGaA are non-par-value

bearer shares. Each share represents € 1.00 of the capital

stock. Shareholders’ rights are regulated by the German Stock

Corporation Act (AktG – Aktiengesetz).

Fresenius Management SE, as general partner, is author ized,

subject to the consent of the Supervisory Board of Fresenius

SE & Co. KGaA:

▶ to increase the subscribed capital of Fresenius SE & Co.

KGaA by a total amount of up to € 120.96 million, until

May 15, 2019, through a single or multiple issuance

of new bearer ordinary shares against cash contributions

and / or contributions in kind (authorized Capital i).

Shareholders’ pre-emptive rights of subscription can be

excluded.

In addition, there are the following Conditional Capitals, of

which the Conditional Capitals I and II are adjusted for stock

options that have been exercised in the meantime:

▶ The subscribed capital is conditionally increased by up to

€ 5,773,056.00 through the issuance of new bearer ordi-

nary shares (Conditional Capital i). The conditional capi-

tal increase will only be executed to the extent that con-

vertible bonds for ordinary shares have been issued under

the 2003 Stock Option Plan and the holders of these con-

vertible bonds exercise their conversion rights.

▶ The subscribed capital is conditionally increased by up

to € 10,901,188.00 through the issuance of new bearer

ordinary shares (Conditional Capital ii). The conditional

capital increase will only be executed to the extent that

subscription rights have been issued under the 2008 Stock

Option Plan, the holders of these subscription rights exer-

cise their rights, and the Company does not use its own

shares to service the subscription rights or does not exer-

cise its right to make payment in cash.

▶ The general partner is authorized, with the approval of

the Supervisory Board, until May 15, 2019, to issue option

bearer bonds and / or convertible bearer bonds, once or

several times, for a total nominal amount of up to € 2.5 bil-

lion. To fulfill the granted subscription rights, the sub-

scribed capital of Fresenius SE & Co. KGaA was increased

conditionally by up to € 48,971,202.00 through issuance

of new bearer ordinary shares (Conditional Capital iii).

The conditional capital increase shall only be implemented

to the extent that the holders of convertible bonds issued

for cash, or of warrants from option bonds issued for

cash, exercise their conversion or option rights and as long

as no other forms of settlement are used.

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▶ The share capital is conditionally increased by up to

€ 25,200,000.00 by the issuance of new ordinary bearer

shares (Conditional Capital iV). The conditional capital

increase will only be implemented to the extent that

subscription rights have been, or will be, issued in accor-

dance with the Stock Option Program 2013 and the

holders of subscription rights exercise their rights, and

the Company does not grant own shares to satisfy the

subscription rights.

The Company is author ized, until May 15, 2019, to purchase

and use its own shares up to a maximum amount of 10%

of the subscribed capital. In addition, when purchasing own

shares, the Company is authorized to use equity derivatives

with possible exclusion of any tender right. The Company had

not utilized these author izations as of December 31, 2014.

direct and indirect ownership interests in Fresenius SE &

Co. KGaA are listed on pages 147 f. of the Notes. As the larg-

est shareholder, Else Kröner-Fresenius-Stiftung informed the

Company on December 16, 2014, that it held 144,695,094

ordi nary shares of Fresenius SE & Co. KGaA. This corresponds

to an equity interest of 26.72% as of December 31, 2014.

amendments to the articles of association are made in

accordance with Section 278 (3), Section 179 (2) of the Ger-

man Stock Corporation Act (AktG) in conjunction with Sec-

tion 17 (3) of the articles of association of Fresenius SE & Co.

KGaA. unless mandatory legal provisions require otherwise,

amendments of the articles of association require a simple

majority of the subscribed capital represented in the resolution.

If the voting results in a tie, a motion is deemed rejected.

Furthermore, in accordance with Section 285 (2) sentence 1 of

the German Stock Corporation Act (AktG), amendments to

the articles of association require the consent of the general

partner, Fresenius Management SE. The Supervisory Board

is entitled to make such amendments to the articles of associ-

ation that only concern their wording without a resolution of

the General Meeting.

under certain circumstances, a change of control as the

result of a takeover bid could impact some of our long-term

financing agreements, which contain customary change of con-

trol provisions that grant creditors the right to terminate

agreements early or to request early repayments of outstand-

ing amounts in case of a change of control. These termina-

tion rights partly become effective if the change of control

is followed by a decline of the Company’s rating or of the

respective financing instruments.

goals and stRategYOur goal is to strengthen the position of Fresenius as a lead-

ing global provider of products and therapies for critically

and chronically ill people. With our four business segments,

we are concentrating on a limited number of health care

areas. Thanks to this clear focus, we have developed unique

competencies. We are following our long-term strategies

consistently and are seizing our oppor tunities.

The key elements of Fresenius Group’s strategy and goals

are to:

▶ expand market position and worldwide presence:

Fresenius seeks to ensure and expand its long-term posi-

tion as a leading international provider of products and

services in the health care industry. To this end, and to geo-

graphically expand our business, we plan to grow organi-

cally as well as through selective small and medium-sized

acquisitions, complementing our existing portfolio. We

focus on markets with strong growth rates. Fresenius Kabi,

for example, has strengthened its IV business through

an acquisition in Brazil.

Fresenius Medical Care is the worldwide leader in

dialysis, with a strong market position in the united States.

Future opportunities in dialysis will arise from further

international expansion in dialysis care and products and

in renal pharmaceuticals, as well as the expansion in the

field of Care Coordination. In this area, Fresenius Medical

Care offers additional services for dialysis patients. These

include, e. g., laboratory and vascular care services. In

2014, Fresenius Medical Care has significantly strength-

ened this area through several acquisitions. By expanding

its business, the company addresses a growing need for

integrated patient care.

Fresenius Kabi is the market leader in infusion therapy

and clinical nutrition in Europe and in the key markets

in Asia-Pacific and Latin America. In the united States,

Fresenius Kabi is one of the leading players in the market

for generic IV drugs. In addition, Fresenius Kabi is one

of the most important providers of transfusion technology.

Fresenius Kabi plans to roll out products from its existing

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portfolio to the growth markets and to launch existing

products in the united States. In 2014, Fresenius Kabi

was granted uS approval for products in the fields of clin-

ical nutrition and medical devices. Market share is to

be expanded further through the launch of new products

in the field of IV drugs and medical devices for infusion

therapy and clinical nutrition, as well as in transfusion

technology.

Including the 41 hospitals acquired from Rhön-Klini-

kum AG, Fresenius Helios is operating in nearly the whole

of Germany. Building on this, Fresenius Helios is now in

the position to develop new patient care models and take

advantage of further growth opportunities arising from the

privatization process in the German hospital market.

Fresenius Vamed will further expand its position as a

global specialist for pro jects and services for hospitals

and other health care facilities.

▶ strengthen innovation: Fresenius’ strategy is to continue

building on its strength in technology, its competence

and quality in patient care, and its ability to manufacture

cost-effectively. We want to develop products and systems

that provide a high level of safety and user-friendliness

and enable tailoring to individual patient needs. We intend

to continue to meet our requirements of best-in-class

medi cal standards by developing and offering more effec-

tive products and treatment methods for the critically and

chronically ill. The goal of Fresenius Helios is to system-

atically foster interdisciplinary knowledge sharing and to

use innovation to develop the best health care services and

innovative therapies for our patients. Fresenius Vamed’s

goal is to realize further projects in integrated health care

services and to support patient-oriented health care sys-

tems more efficiently.

▶ enhance profitability: Last but not least, it is our goal to

improve Group profitability. To contain costs, we are con-

centrating particularly on making our production plants

more efficient, exploiting economies of scale, leveraging

the existing marketing and distribution infrastructure

more intensively, and practicing strict cost control. By

focusing on our operating cash flow and employing effi-

cient working capital management, we will increase our

investment flexibility and improve our balance sheet ratios.

Another goal is to optimize our weighted average cost of

capital (WACC) by deliberately employing a balanced mix

of equity and debt funding. In the present capital market

conditions, we optimize our cost of capital if we hold the

net debt / EBITDA ratio within a range of 2.5 to 3.0. Please

see pages 50, 64 and, 75 for more details.

We report on our goals in detail in the Outlook section on

pages 76 to 82.

CoRpoRate peRFoRManCe CRiteRiaThe Management Board controls the business segments by

setting strategic and operating targets and through financial

ratios. The most important ratios are explained below:

In line with our growth strategy, sales growth (in con-

stant currency) of the Group and, in our business segments,

in particular organic sales growth is of central importance.

ebit and the ebit margin, respectively, are useful yardsticks

for measuring the profitability of the business segments. At

Group level, we primarily use net income to this end.

At Group level, operating cash flow and the cash flow

margin are also used as key performance figures. With regard

to the operating cash flow contributions of our business seg-

ments, we also analyze the key performance indicators days

sales outstanding (DSO) and scope of inventory (SOI).

Our investments are controlled using a detailed coordi-

nation and evaluation process. As a first step, the Manage-

ment Board sets the Group’s investment targets and the bud-

get based on investment proposals. In a second step, the

respective business segments and the internal Acquisition &

Investment Council (AIC) determine the proposed projects

and measures while taking into account the overall strategy,

the total investment budget, and the required and potential

return on investment. The investment projects are evaluated

based on commonly used processes, such as the internal

rate of return (IRR) and net present value (NPV). Graduated

according to investment volume, a project is submitted for

approval to the executive committees or respective manage-

ments of the business segments, or to the Management Board

of Fresenius Management SE or its Supervisory Board.

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Another key performance indicator at the Group level is the

debt ratio, which is the ratio of net debt to EBITDA. This mea-

sure indicates how far a company is in a position to meet its

payment obligations. Our business segments usually hold lead-

ing positions in growing and mostly non-cyclical markets.

They generate mainly stable, predictable cash flows since the

majority of our customers are of high credit quality. The Group

is therefore able to finance its growth with a high proportion

of debt compared to companies in other industries.

At Group level, we use return on operating assets (Rooa)

and return on invested capital (RoiC) as benchmarks for

evaluating our business.

ReseaRCh and deVelopMentProduct and process development as well as the improvement

of therapies are at the core of our growth strategy. Fresenius

focuses its R & D efforts on its core competencies in the fol-

lowing areas:

▶ Dialysis

▶ Infusion and nutrition therapies

▶ Generic IV drugs

▶ Medical devices

Apart from new products, we are concentrating on develop-

ing optimized or completely new therapies, treatment methods,

and services.

Research and development expenses were € 369 million

(2013: € 348 million), approximately 4.8% of our product sales

(2013: 4.6%). Fresenius Medical Care decreased its R & D

spending by 3%, Fresenius Kabi increased its R & D spending

by 10%. Detailed figures are included in the segment report-

ing on pages 98 f.

As of December 31, 2014, there were 2,107 employees in

research and development (2013: 1,969). Of that number,

628 were employed at Fresenius Medical Care (2013: 583)

and 1,479 at Fresenius Kabi (2013: 1,386).

Our main research sites are in Europe, the united States,

and India. Product-related development activities are also

carried out in China. Our R & D projects are mainly conducted

in-house; external research is commissioned only on a lim-

ited scale.

FResenius MediCal CaRe

The complex interactions and side effects that lead to kidney

failure are better explored today than ever before. Techno-

logical advances develop in parallel with medical insights to

improve the possibilities for treating patients. Our R & D activ-

ities at Fresenius Medical Care aim to translate new insights

into novel or improved developments and to bring them to mar-

ket as quickly as possible, and thus make an important con-

tribution towards rendering the treatment of patients increas-

ingly comfortable, safe, and individualized.

With our global R & d portfolio management, we seek to

standardize basic functions and single components of our

therapy systems internationally and to standardize process and

control structures. At the same time, it allows us to address

local requirements, to reduce development time, and to pool

our resources.

In 2014, we moved forward with the development of our

products and have introduced several innovative products

onto the markets in which we are active. This includes the new

devices Sleepsafe Harmony and Liberty PDx for peritoneal

dialysis. Both machines feature improved user interfaces and

expanded therapy options. In hemodialysis, we introduced a

new version of our Critline system, which automatically admin-

isters the liquid draw according to a doctor’s specification.

With the market introduction of an automatic sodium balanc-

ing system during dialysis treatment, we are contributing to

improvements in this area.

R & D EXPENSES BY SEGMENT

Fresenius Medical Care 25%

Fresenius Kabi 75%

2014: € 369 million

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In 2014, we also pushed the development of the portable arti-

ficial kidney (PAK). The product is scheduled for introduction

in the united States in 2015. Major advantages of PAK are

the miniaturization and portability, as well as the significant

reduction of water usage per treatment from an average of

120 to between six and ten liters.

Going forward, we want to strengthen our development

pipeline and focus on growth markets. We plan to introduce

basic therapy systems specifically designed for the Chinese

market. In order to do so, we laid the foundation for a develop-

ment center in Shanghai.

FResenius Kabi

Fresenius Kabi’s research and development activities concen-

trate on products for the therapy and care of critically and

chronically ill patients. Our products help to support medi-

cal advancements in acute and post-acute care and improve

the patients’ quality of life. Our development expertise

includes all the related components, such as the drug raw

material, the pharmaceutical formulation, the primary pack-

aging, the medical device needed for application, and the

production technology.

In the area of iV drugs, we are developing an extensive

port folio of active drugs that are expected to come on the mar-

ket in the next few years. In 2014, we worked on more than

120 development projects for generic drugs. Worldwide, many

of our drugs were approved in 2014. We develop generic drug

formulations ready to launch at the time of market formation

as well as new formulations for non-patented drugs.

In an ongoing development effort, we aim to provide ready-

to-use solutions for IV drugs, which currently exist only in

lyophilized or powder form. In addition, we are working on

offering our IV drugs in our innovative primary packagings,

which are especially user-friendly and safe, e. g., freeflex

infusion bags.

In clinical nutrition, our focus is on nutrition products

that improve the therapy of patients in hospitals and innova-

tive containers, e. g., multi-chamber bags that allow maximum

application safety and convenience in everyday use.

Among other things, our efforts have focused on the early

and correct use of parenteral nutrition in order to avoid mal-

nutrition and its consequences. One focus is on the clinical

benefits of individual nutrients. For example, a cooperative

research effort conclusively established that a supplementation

of omega-3 fatty acids is associated with a significant reduc-

tion in infection rate and length of hospital stay for critically

ill patients. 1 In enteral nutrition, we focus on products for

malnourished – often geriatric – patients and on therapeutic

products for dysphagia (difficulties in swallowing), diabetes,

oncology, and critical illness.

In the development of our medical devices / transfusion

technology, we focus on the application of IV drugs and

infusion therapies as well as enteral and parenteral nutrition

products. Our medical devices significantly contribute to

the safe and effective application of infusion solutions and clin-

ical nutrition. In 2014, we worked on the technical enhance-

ment of our Agilia infusion pumps and plan to introduce the

latest generation in 2015. In addition, we have been work-

ing on the development of a new infusion pump, specifically

designed for the demands of hospitals and health care facili-

ties in emerging markets, which we plan to introduce during

2015. In transfusion technology our R & D focus is on medical

devices and disposables to support the secure, user-friendly,

and efficient production of blood products.

2014 2013 2012 2011 2010

R & D expenses, € in millions 369 348 305 267 244

as % of product sales 4.8 4.6 4.4 4.3 4.2

R & D employees 2,107 1,969 1,903 1,592 1,449

KEY FIGuRES RESEARCH AND DEVELOPMENT

1 Pradelli L et al. Cost-effectiveness of omega-3 fatty acid supplements in parenteral nutrition therapy in hospitals: a discrete event simulation model. Clinical Nutrition 2014;33(5):785-92.

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eMploYeesThe knowledge, experience, and commitment of our employ-

ees are critical to our success. For this reason, Fresenius

values a culture of diversity. The interplay of a wide range of

views, opinions, cultural backgrounds, experiences, and val-

ues helps us to achieve our full potential and contributes to

our success.

The number of employees increased significantly to

216,275 employees at the end of 2014, which was 37,938 or

21% more than last year. The increase applies to all busi-

ness segments, and 19% is attributable to acquisitions, mainly

at Fresenius Medical Care and Fresenius Helios.

personnel expenses for the Fresenius Group were € 8,996

million in 2014 (2013: € 7,360 million), equivalent to 38.7%

of sales (2013: 36.2%). The increase of 22% is mainly attrib-

utable to acquisitions but also affected by wage scale pro-

gression. Personnel expenses per employee were at € 42.7

thousand (2013: € 42.1 thousand) and at € 42.3 thousand in

constant currency. In Germany, Fresenius companies have

signed tariff agreements with IG BCE, Marburger Bund, as

well as ver.di (labor union for services). There were no signif-

icant structural changes to compensation or employment

agreements in 2014.

huMan ResouRCes ManageMent

We are constantly adapting our human resources tools to meet

new requirements arising from demographics, the transfor-

mation to a service economy, skills shortages, and the compati-

bility of job and family life. For example, we offer flexible

working hours.

Part of our identity as a health care company includes creating

the right conditions to foster the health of the employees.

eMploYee ReCRuitMent and peRsonnel

deVelopMent

In order to ensure that our long-term needs for highly qualified

employees are met, and to recruit new employees, we make

use of online personnel marketing and regularly participate in

recruiting events and careers fairs. In addition, we encourage

long-term retention with attractive development programs.

The approaches and measures for employee recruitment

and personnel development in the business segments are

based on the market structure of each segment. They are coor-

dinated, developed, and realized independently for each busi-

ness segment.

We support the development of our employees’ profes-

sional and personal skills across the Group through personal

career talks as well as through our comprehensive range of

training sessions and seminars. We continue to expand these

at all hierarchy levels.

EMPLOYEES BY REGION

Asia-Pacific 9%

Latin America and other regions 9%

North America 30%

Europe 52% (thereof Germany 37%)

2014: 216,275

Number of employees dec. 31, 2014 Dec. 31, 2013 Change % of total

Fresenius Medical Care 105,917 95,637 11% 49%

Fresenius Kabi 32,899 31,961 3% 15%

Fresenius Helios 68,852 42,913 60% 32%

Fresenius Vamed 7,746 7,010 10% 4%

Corporate / Other 861 816 6% 0%

total 216,275 178,337 21% 100%

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Fresenius promotes the long-term, sustainable advancement

of women, to derive greater benefit from their strengths and

abilities now and in the future. However, we do not set any

fixed quotas for management positions. At Fresenius, qualifi-

cations are the only thing that matters in the selection of

personnel. Consequently, at Fresenius women and men with

comparable qualifications will continue to have the same

career opportunities. As of December 31, 2014, the propor-

tion of female employees within the Fresenius Group was

68%. Women also held 30% of senior management positions,

based on the number of worldwide participants in the stock

option plans.

The Fresenius Group devotes a lot of attention to voca-

tional training. We trained more than 3,650 young people

in 49 different occupations at our German locations in 2014,

and also put more than 70 university students through 12

degree programs in cooper ation with dual institutions of

higher learning. Alongside the traditional channel of direct

job entry, Fresenius offers trainee programs for university

graduates.

You can visit our award-winning careers portal at

www.fresenius.com in the “Career” section.

pRoFit-shaRing sCheMe and stoCK

option plan

For many years, we have paid a stock-based profit-sharing

bonus that is tied to the annual operating profit (EBIT) of

Fresenius Group. The table below shows the development in

the profit-sharing bonus over the last several years.

With our long term incentive program 2013, we have

a global compensation instrument linking management’s

entrepreneurial responsibility to future opportunities and risks.

It comprises the Stock Option Plan 2013, as well as the Phan-

tom Stock Plan 2013, and combines the granting of stock

options with the granting of phantom stock awards. For further

information on stock options, please see pages 171 ff. of this

Annual Report.

pRoCuReMentIn 2014, the cost of raw materials and supplies and of pur-

chased components and services was € 7,053 million (2013:

€ 6,385 million). The cost of raw materials and supplies were

10% above the previous year’s level. The increase was mainly

due to higher sales volume.

€ in millions 2014 2013

Cost of raw materials and supplies 6,079 5,566

Cost of purchased components and services 974 819

total 7,053 6,385

An efficient value chain is important for our profitability. In an

environment characterized by ongoing cost-containment pres-

sure from health insurers as well as price pressure, security

and quality of supply play a crucial role. Within each business

segment of the Fresenius Group, procurement processes are

coordinated centrally, enabling us to bundle similar require-

ments and negotiate global framework agreements.

COST OF MATERIAL BY BuSINESS SEGMENT 1

Fresenius Vamed 8%

Fresenius Helios 15%

Fresenius Kabi 26%

1 Before consolidation

Fresenius Medical Care 51%

2014: € 7,053 million

2013 2012 2011 2010 2009

Profit-sharing bonus 1 in € 2,134 2,164 2,036 2,000 1,749

Eligible employees 2 2,155 2,313 2,220 1,790 1,710

1 The profit-sharing bonus is paid retroactively for the respective fiscal year. It forms part of compensation in some German Group companies. 2 Without eligible employees of Fresenius Medical Care AG & Co. KGaA

PROFIT-SHARING BONuS

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QualitY ManageMentThe quality of our products, services, and therapies is the

basis for optimal medical care. All processes are subject to

the highest quality and safety standards, for the benefit of

the patients and to protect our employees. Our quality man-

agement has the following three main objectives:

▶ to identify value-enhancing processes oriented toward

efficiency and the needs of our customers

▶ to monitor and manage these processes on the basis of

performance indicators

▶ to improve procedures


Fresenius Medical Care has established quality management

systems at all production sites and dialysis centers and we

commission regular external audits on their use. In Europe,

this is performed by the German technical certification orga-

nization TÜV. These conformance and certification experts

audit our clinical organizations annually to verify their compli-

ance with ISO 9001 for quality management and ISO 14001

for environmental management. In the united States, our clin-

ics are monitored by the Centers for Medicare and Medicaid

Services (CMS), a public health care authority. We also regu-

larly review our quality management systems through inter-

nal audits.

Our ultraCare brand in North America and our NephroCare

brand in the other regions are part of an integrated therapy

concept that sets quality standards in our clinics as well as for

home dialysis. The nephroCare excellence program defines

mid- and long-term operating and quality goals. These goals

pertain to medical quality, but also relate to the effective use of

staff and staff development, enhancing efficiency, standardiz-

ing processes, and the sustainable use of natural resources.

We measure and compare our quality performance in

our clinics using certain performance indicators. In addition

to industry-specific clinical benchmarks, they include our

own quality targets, i. e., linked to the services and advice we

provide. Fresenius Medical Care uses quality parameters

that are generally recognized in the dialysis industry, e. g., the

hemoglobin value.

FResenius Kabi

The global quality management system at Fresenius Kabi

is based on the internationally recognized ISO 9001 standard,

which takes into account many national and international

regulations governing product and services development, man-

ufacturing, and marketing. These include, for example, Good

Clinical Practice (GCP), Good Manufacturing Practice (GMP),

Good Distribution Practice (GDP), the Code of Federal Regula-

tions (CFR) of the u.S. Food and Drug Administration (FDA),

as well as the ISO 13485 quality management standard for

medical devices. The global quality management system is cer-

tified by TÜV Süd and annually audited on an international

basis. Our quality management comprises:

▶ global processes and standards: Specialist teams develop

enterprise-wide standards and guidelines. Those apply to

all production sites of Fresenius Kabi.

▶ early warning system: We have established reporting

processes for standard procedures and unforeseen events,

which are evaluated against key performance indicators,

e. g., complaint rates.

▶ integrated global crisis management: Safety officers

respond immediately when we are informed of a problem

with quality of patient safety. They manage product

recalls centrally.

At Fresenius Kabi, inspections by regulatory authorities and

audits by independent organizations and customers are per-

formed along the entire value chain.

However, our quality management system does not just

extend to internal processes. It also covers the application of

our products and services by customers. In order to be able to

receive information about their problems in a timely manner

and deal with them appropriately, Fresenius Kabi has set up a

global monitoring and reporting system (vigilance system).

The responsible regulatory authorities monitor this system and

keep an increasingly close eye on it in the interests of patient

safety.

In 2014, we migrated the customer complaint management

process to new web-based technology. In addition, we have

strengthened our quality management organization with new

employees.

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FResenius helios

The helios quality management system has been further

expanded and implemented at all hospitals acquired from

Rhön-Klinikum AG. HELIOS has developed a method that

combines the use of quality indicators with internal quality

management measures. The quality of medical outcomes

resulting from the different treatments is measured using key

indicators compiled from administrative data and then made

transparent on the basis of g-iQi quality indicators (German

Inpatient Quality Indicators). The results are continuously

monitored, and should statistical abnormalities arise, HELIOS

examines these in a peer review process using patient data.

We have defined specific targets for 46 of the G-IQI qual-

ity indicators. These targets are set at a level above the national

average for Germany. In 2014, we achieved this target for

42 1 quality indicators, a success rate of 91% 1 (2013: 91%).

If targets are not met, HELIOS analyzes the cases in the hospi-

tals concerned in order to identify opportunities for improve-

ment and to implement appropriate measures for all HELIOS

hospitals.

In addition, HELIOS is involved in the initiative of Quality

Medicine (iQM). The members of this initiative have a share of

approximately 19% for acute care in Germany. The 250 IQM

members are committed to observing three principles: quality

measurement with administrative data, publication of results,

and peer review processes.

HELIOS provides full transparency for all quality data.

For each acute care hospital, the results for medical treatment

quality as well as the occurrence of the 17 most common

infectious agents are published on the website www.helios-

kliniken.de. Helios exceeds mandatory legal requirements.

A new national quality institute is intended to further

increase the focus on quality of care in German hospitals.

With its own quality management system, HELIOS is well

prepared.

FResenius VaMed

In the planning and construction of hospitals, Fresenius Vamed

sets high quality standards. In particular, these are aimed at

optimizing processes by care level, and ensuring maximum

flexibility in the use of buildings and wards.

Internally, Fresenius Vamed designs its processes for effi-

ciency and sustainability, using interdisciplinary quality stan-

dards. These standards are mostly based on ISO 9001:2008

and ISO 13485:2003 standards, as well as the standards of the

European Foundation for Quality Management (EFQM).

In the hospital area, VAMED uses the certification model

JCi (Joint Commission international). In 2014, this certifica-

tion was awarded to a facility in Austria for the fourth time. In

total, four facilities managed by VAMED in the Czech Republic

and Austria received this certification. These hospitals were

certified to have the highest level of quality, firstly regarding

patient care, secondly regarding hygiene and safety, and thirdly

regarding patient and employee satisfaction.

ResponsibilitY, enViRonMental ManageMent, sustainabilitYWe orient our activities within the Fresenius Group to long-

term goals, and thus ensure that our work is aligned to the

needs of patients and employees, as well as shareholders and

business partners, in a sustainable manner. Our responsibil-

ity as a health care group goes beyond our business opera-

tions. We are committed to protecting nature as the basis

of life and using its resources responsibly. It is our mission to

constantly improve our performance in the areas of environ-

mental protection, occupational health and technical safety,

and product responsibility and logistics, and to comply with

legal requirements.

Indications / standardized mortality ratio (SMR 2) 2014 sMR 2013 SMR 3

Chronic obstructive pulmonary disease (COPD) 0.63 0.72

Acute myocardial infarction (AMI) 0.74 0.77

Heart failure 0.53 0.65

Ischemic stroke 0.81 0.91

Pneumonia 0.66 0.73

Hip fracture 0.88 0.81

1 Excluding acquired Rhön hospitals2 SMR 1 corresponds to the German average.

SMR < 1 = means that mortality is below the German average.3 Adjusted for the current reference value of the German Federal Statistical Office,

excluding hospitals divested in 2014

More information can be found at: http: // www.helios-kliniken.de / medizin / qualitaetsmanagement

HELIOS QuALITY PERFORMANCE INDICATORS (EXTRACT) 1

1 Excluding acquired Rhön hospitals

http://www.helios-kliniken.de/medizin/qualitaetsmanagement

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The international ISO Standard 14001 is an important bench-

mark for environmental management in the corporate sector.

Among other things, it stresses the need for continuous assess-

ment of a production site’s impact on the environment, for

example with respect to emissions and waste. This interna-

tional standard is implemented at our various production

plants and most of our dialysis clinics. Key environmental per-

formance indicators are, for instance, not only energy and

water consumption, but also the volumes of waste and recy-

cling rates at our locations.

In Europe, our production sites are subject to the eu reg-

ulation ReaCh (Registration, Evaluation, and Authorization of

CHemicals). The aim of REACH is to protect human health

and the environment against hazards and risks from chemical

substances.


We work on designing our products and processes to be as

environmentally compatible as possible by employing new

materials with improved environmental properties, pushing

the development of new technologies that further reduce

the resource consumption of our dialysis machines, and, not

least, by using energy and raw materials efficiently in pro-

duction.

In Europe, the Middle East, and Africa (EMEA), TÜV-certi-

fied environmental management is part of the integrated

management system. At the end of 2014, nine European pro-

duction sites (2013: eight) and our medical device develop-

ment department were certified according to ISO 14001.

We further implemented our environmental program in

Europe and Latin America, with the aim of improving environ-

mental awareness and environmentally responsible behavior,

enhancing knowledge relating to strategic and operational

environmental issues, improving our eco-efficiency, reinforcing

measures to control environmental risks, and ensuring that

environmental regulations are complied with. Those goals are

measured by a number of environmental objectives for the

individual stages of the value chain, e. g., R & D, logistics, or

at our dialysis clinics. We set environmental improvement

targets for production sites. For example, in the EMEA region

we aim to recycle or thermally recover at least 85% of pro-

duction waste by 2015. In 2014, we exceeded our targets for

reducing electricity consumption and minimizing waste ahead

of schedule.

We developed key performance indicators for energy use and

consumption of raw materials in order to demonstrate the

eco-efficiency of our production processes. This has allowed

us to identify further potential in an already largely optimized

production process. We use an energy management system

as per ISO 50001 at our German production sites in St. Wendel

and Schweinfurt.

One of our central concerns is to further reduce the envi-

ronmental effects of dialysis treatments in a resource- and cost-

efficient manner. We are succeeding in doing so by using

environmentally sound dialysis products and by building eco-

friendly dialysis centers. We gather data on our eco-efficiency,

such as our water and energy consumption, and on waste

disposal in 501 (2013: 497) of our European, and 168 (2013:

126) of our Latin American dialysis clinics. Our goal over

time is to establish a comprehensive environmental data

management system. We are able to compare the ecological

efficiency of clinics on a monthly basis, and quickly identify

potential for improvement. In the united States, the energy

and water consumption of our dialysis clinics is documented

within our environmental management and analyzed using

key performance indicators such as greenhouse gas emissions

and climate balance.

FResenius Kabi

An integral component of the quality management of Fresenius

Kabi is an environmental management system that com-

plies with the international standard ISO 14001. We are also

pursuing the implementation of the occupational health and

safety assessment system OHSAS 18001.

We continued to implement measures at our german pro-

duction sites to reduce energy consumption, Co2 emissions,

and the consumption of raw materials: In July 2014, we

installed a combined heat and power plant at our Friedberg

location in Germany. This plant allows us to produce energy

significantly more efficiently and to reduce CO2 emissions by

approximately 30% compared to conventional combustion

power plants.

At the site in Graz, in austria, we were able to keep energy

consumption at the previous year’s level despite the growth

in production area. We were able to reduce natural gas con-

sumption by 3% and steam consumption by 30% by introduc-

ing new production technologies. Additional recycling and

the implementation of technical measures, such as the reuse

of cooling water, minimizes waste and waste water volumes,

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and will continue to do so in the future even with rising pro-

duction volumes. The recycling rate remained stable at

above 80%.

At our production sites in uppsala and Brunna, in sweden,

our waste tonnage was 5,646 t (2013: 5,253 t), and our total

recycling rate was 97.0% (2013: 98.4%). The percentage of

waste used to generate energy was on previous year’s level

of 37%. Approximately 41% of the energy needed is provided

by renewable energies. Water consumption was 286,043 m3

(2013: 282,000 m3).

We also expanded our environmental activities outside

of Europe. At our Brazilian production site for infusion bags

we implemented a polyethylene regranulation system, which

recycles 85% of the scrap generated.

Fresenius Kabi also integrates standardized requirements

for health, safety, and environmental protection into its

quality management system. In the manufacturing of pharma-

ceuticals, the employees of Fresenius Kabi sometimes have

to work with toxic substances. Consequently, protecting the

environment and ensuring the health and safety of our employ-

ees is of utmost importance. New requirements relating to

occupational health and safety are integrated into our quality

management.

FResenius helios

Hospitals require a great deal of energy and water. In order

to create awareness for the economical use of resources, we

intensified the environmental campaign within HELIOS and

extended it to the new HELIOS hospitals.

The structural condition of a hospital building has an

important influence on energy consumption. All new construc-

tion projects and modernizations conform to the latest stan-

dards of efficient heat insulation pursuant to the currently

valid energy savings regulations. In addition to the environ-

mental campaign, HELIOS has introduced a controlling sys-

tem for its facility management. Results are released on a

monthly basis and allow for timely analysis of targets against

figures achieved, and corresponding optimization measures.

In 2014, HELIOS has installed combined heat and power

plants and gas turbines in 30 hospitals, doubling the Com-

pany’s number of heat and power plants. In addition, HELIOS

is successively switching the heating of its hospitals over to

renewable energies, for instance wood pellets. This form of

heating is CO2-neutral and therefore more environmentally

friendly than gas or oil heating. Thanks to the steps taken, we

generated approximately 34,500 t (2013: 13,100 t) less CO2

in 2014. We surpassed our energy savings target by 10,000 t

of CO2 in 2014.

Water consumption 1 in all HELIOS hospitals was

4,152,704 m3 (2013: 2,805,000 m3). The majority of all water

is consumed for sterilization processes, process cooling,

and water recycling plants. To reduce consumption, some

hospitals are using well water, for instance for the cooling

towers of air-conditioning systems.

Proper waste disposal is of great importance to hospitals.

HELIOS views waste disposal management as a process. It

starts with avoiding any future waste, and ends with the con-

sistent recycling or environmentally friendly disposal of the

same. Requirements pertaining to environmental protection,

occupational health and safety, as well as infection protec-

tion and hospital hygiene are taken into account. That relates

particularly to major waste groups such as clinical waste,

i. e., from the diagnosis and treatment of human diseases. In

2014, the total amount of waste 1 generated in all HELIOS

hospitals was 21,125 t (2013: 12,845 t).

FResenius VaMed

In our project business, we already integrate national environ-

mental standards and regulations into the planning and con-

struction of a hospital or other health care facility. VAMED’s

extensive expertise in environmental management is an impor-

tant success factor, especially in growth markets in Africa

and Asia. For instance, VAMED built and now operates a hos-

pital in Gabon, which features a modern sewage treatment

plant and a high-temperature incineration plant designed to

European standards.

We also achieved success in the service business in

the area of environmental protection. VAMED, for instance,

has been responsible for the technical management of the

Vienna General Hospital and university Hospital AKH for over

25 years. During the period, energy and water consumption

were significantly reduced: energy consumption decreased by

13%, demand for long-distance heat by 22%, and drinking

water consumption by 40%. The volume of waste classified as

hazardous medical waste at AKH fell by about 70%.

1 The increase is primarily due to the acquisition of 41 hospitals from Rhön-Klinikum AG.

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Management Report58

RepoRt on economic position

HeALtH cARe inDUstRYThe health care sector is one of the world’s largest industries.

It is relatively insensitive to economic fluctuations compared

to other sectors and has posted above-average growth over

the past several years.

The main growth factors are:

▶ rising medical needs deriving from aging populations

▶ the growing number of chronically ill and multimorbid

patients

▶ stronger demand for innovative products and therapies

▶ advances in medical technology

▶ the growing health consciousness, which increases the

demand for health care services and facilities.

In the emerging countries, drivers are:

▶ expanding availability and correspondingly greater

demand for basic health care

▶ increasing national incomes and hence higher spending

on health care.

At the same time, the cost of health care is rising and claim-

ing an ever-increasing share of national income. Health care

spending averaged 9.3% of GDP in the OECD countries in

2012, with an average of US$ 3,484 spent per capita.

As in previous years, the United States had the highest per

capita spending (US$ 8,745). Germany ranked sixth among the

OECD countries with per capita spending of US$ 4,811.

In Germany, 77% of health spending was funded by pub-

lic sources in 2012, above the average of 72% in the OECD

countries.

Most of the OECD countries have enjoyed large gains in

life expectancy over the past decades, thanks to improved

living standards, public health interventions, and progress in

medical care. In 2012, average life expectancy in the OECD

countries was 80.2 years.

Health care structures are being reviewed and cost-cutting

potential identified in order to contain the steadily rising

health care expenditures. However, such measures cannot

compensate for the cost pressure. Market-based elements

are increasingly being introduced into the health care system

to create incentives for cost- and quality-conscious behavior.

Overall treatment costs will be reduced through improved

quality standards. In addition, ever-greater importance is being

placed on disease prevention and innovative reimbursement

models linked to treatment quality standards.

Our most important markets developed as follows:

HEALTH CARE SPENDING AS % OF GDP

Sources: OECD Health Data 2014

in % 2012 2000 1990 1980 1970

USA 16.9 13.1 11.9 8.7 6.8

France 11.6 10.1 8.4 7.0 5.4

Germany 11.3 10.4 8.3 8.4 6.0

Switzerland 11.4 9.9 8.0 7.2 5.3

Source: OECD Health Data 2014

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management Report Report on economic position 59

tHe DiALYsis mARket

In 2014, the global dialysis market (products and services)

was worth approximately US$ 77 billion. In constant currency,

the global dialysis market grew by 4%.

The number of dialysis patients worldwide increased by

about 6% to approximately 2.7 million in 2014. Of these,

about 89% were treated with hemodialy sis and approximately

11% with peritoneal dialysis. The major growth driver is the

growing number of patients suffering from diabetes and high

blood pressure, two diseases that often precede the onset of

chronic kidney failure.

The United States, Japan, and Western and Central Europe

recorded below-average growth in the number of patients

in 2014. In economically weaker regions, growth was above

average.

The prevalence rate, which is the number of people with

terminal kidney failure treated per million population, differs

widely from region to region. In developing countries it can

be well below 100. It averages just over 1,100 in the countries

of the European Union. Prevalence is very high in countries

such as Japan and the United States, being well over 2,000.

The significant divergence in prevalence rates is due, on the

one hand, to differences in age demographics, incidence of

renal risk factors, and genetic pre-disposition and cultural

habit, such as nutrition. On the other hand, access to dialysis

treatment is still limited in many countries. A great many

individuals with terminal kidney failure do not receive treat-

ment and are therefore not included in the prevalence

statistics.

Dialysis careIn 2014, the global dialysis care market (including renal

pharmaceuticals) was worth approximately US$ 63 billion.

11% of worldwide dialysis patients were treated by

Fresenius Medical Care. With 3,361 dialysis clinics and 286,312

dialysis patients in over 45 countries, Fresenius Medical Care

operates by far the largest and most international network

of hospitals. In the United States, Fresenius Medical Care

maintained its market-leading position of approximately 37%

(~ 171,000) dialysis patients in 2014. The market for dialysis

care in the United States is already highly consolidated. Taken

together, Fresenius Medical Care and the second-largest pro-

vider of dialysis care − DaVita − treat over 70% of all U.S. dial-

ysis patients.

Outside the United States, the market for dialysis care is

much more fragmented. Here, Fresenius Medical Care com-

petes mainly with independent clinics and with clinics that are

affiliated with hospitals.

Dialysis reimbursement systems differ from country to

country and often vary even within individual countries. The

public health care programs, the Centers for Medicare &

Medicaid Services (CMS), cover the medical services for the

majority of all dialysis patients in the United States.

Dialysis productsIn 2014, the global dialysis products market was worth

approximately US$ 14 billion.

Fresenius Medical Care is the leading provider of dialysis

products in the world, with a market share of about 34%,

followed by its largest competitor, Baxter, with 29%. Each of

the other competitors, mainly from Japan, held a single-digit

percentage market share.

Fresenius Medical Care is the leading supplier worldwide

of hemodialysis products with a market share of 38%. With

a market share of 21%, Fresenius Medical Care is the second-

largest provider worldwide of products for peritoneal dialysis

after Baxter. In the United States, Fresenius Medical Care’s

share of the peritoneal dialysis market is 43%.

DIALYSIS PATIENTS BY REGION

Latin America 10%

North America 22%

Europe / Middle East / Africa 25%

Asia-Pacific 43%

2014: 2,665,000 patients

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Management Report60

tHe mARket foR geneRic iv DRUgs, cLinicAL

nUtRition, infUsion tHeRApY, AnD meDicAL

Devices / tRAnsfUsion tecHnoLogY 1

The global market for generic IV drugs, clinical nutrition,

infusion therapy and medical devices / transfusion technology

was worth about € 29 billion in 2014.

Thereof, the global market for generic iv drugs was

worth about € 13 billion. In Europe and the United States, the

market grew by about 5% to 6%. Growth is mainly achieved

through new generics that are brought to market when the

original drug goes off-patent. The market is characterized by

moderate volume growth, steady price erosion, and fierce

competition. In the United States, the most important market

for Fresenius Kabi, the company is one of the leading suppli-

ers. Competitors include Hospira, Sandoz, and Teva Pharma-

ceutical Industries.

The global market for clinical nutrition was worth about

€ 6 billion in 2014. In Europe, the market for clinical nutrition

grew by about 3%. In the emerging markets of Asia-Pacific,

Latin America, and Africa, the clinical nutrition market saw

growth of up to 10%. Growth potential is offered by the often

insufficient administration of nutrition therapies within patient

care – although studies have demonstrated the medical and

economical benefit. In cases of health or age-induced nutri-

tional deficiencies, for example, the administration of clinical

nutrition can reduce hospital costs through shorter stays

and less nursing care. Estimates regarding the European Union

situation indicate that as many as 20 million individuals are

at risk for malnutrition. In the market for clinical nutrition,

Fresenius Kabi is one of the leading companies worldwide. In

parenteral nutrition, the company is the leading supplier

worldwide. In the market for enteral nutrition, Fresenius Kabi

is one of the leading suppliers in Europe. In parenteral nutri-

tion, competitors include Baxter and B. Braun. In the market

for enteral nutrition, Fresenius Kabi competes with, among

others, Abbott, Danone, and Nestlé.

Fresenius Kabi considers its global market for infusion ther-

apy to have been worth about € 5 billion in 2014. In Europe,

the market remained at the prior year’s level in 2014. Growth

in the standard solutions business could not fully offset the

sales decline in blood volume substitutes. In the regions Asia-

Pacific, Latin America, and Africa, the market grew by 4%.

Infusion therapies, such as electrolytes, are standard medical

products to hospitals worldwide. Market growth is mainly

driven by increasing product demand in the emerging markets.

Fresenius Kabi is the market leader in infusion therapy in

Europe. Competitors include Baxter and B. Braun.

We estimate that the global market for medical devices /

transfusion technology to have been worth about € 5 billion

in 2014, including about € 3 billion for medical devices and

about € 2 billion for transfusion technology. The market for

medical devices worldwide grew by about 4% in 2014, while

the market for transfusion technology showed growth of about

1% to 2%. In the medical devices market, the main growth

drivers are technical innovations that focus on application

safety and therapy efficiency. In the transfusion technology

market, growth is driven by increased demand in emerging

markets. Moreover, growth is driven by the growing demand

for plasma-collection devices. Reduced demand for blood bags

and related price reductions have a negative effect. In the

medical devices segment, Fresenius Kabi ranks among the

leading suppliers worldwide. International competitors include

Baxter, B. Braun, CareFusion, and Hospira. In transfusion

technology, Fresenius Kabi is one of the world’s leading com-

panies. Competitors include Haemonetics and Terumo. In all

product segments, Fresenius Kabi also competes with smaller

local providers.

1 Market data refer to Fresenius Kabi’s relevant and addressable markets. Those are subject to annual volatility due to currency fluctuations and patent expiries of original drugs in the IV drug market, among other things.

Sources: Company research, German Society for Nutritional Medicine (DGEM) 2009; Ljungqvist O., Clin Nutr 2010, 29:149-150

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HOSPITAL BEDS BY OPERATOR

Private hospitals 18%

Independent non-profit hospitals 34%

Public hospitals 48%

2013: 500,671

Source: German Federal Statistical Office 2014

KEY FIGURES FOR INPATIENT CARE IN GERMANY

2013 2012 2011 2010 2009Change

2013 / 2012

Hospitals 1,996 2,017 2,045 2,064 2,084 - 1.0%

Beds 500,671 501,475 502,029 502,749 503,341 - 0.2%

Beds per 1,000 population 6.21 6.24 6.26 6.15 6.15 - 0.5%

Length of stay (days) 7.5 7.6 7.7 7.9 8.0 - 1.3%

Number of admissions (millions) 18.79 18.62 18.34 18.03 17.82 0.9%

Average costs per admission in € 1 4,792 4,663 4,547 4,432 4,327 2.8%

1 Total costs, gross

Source: German Federal Statistical Office 2014

tHe geRmAn HospitAL mARket

In 2013 1, the market of acute care hospitals in Germany was

about € 87 billion 2. Personnel costs accounted for about 61%

of hospital costs, and material costs for 38%. Personnel and

material costs each rose by approximately 4%.

Through the increase in admissions, the organic growth of

the acute care hospital market was around 1%. In addition,

potential for growth for private hospital operators arises from

hospital acquisitions or privatization.

The financial situation at hospitals in Germany remained

difficult in 2013, despite a slight easing. 42% of all hospitals

reported a loss at year-end (2012: 51%). The difficult eco-

nomic and financial situation is often accompanied by signifi-

cant investment needs. This is due, in large part, to an invest-

ment backlog that has accumulated because, in the past,

the federal states failed to meet their statutory obligation to

finance necessary investments and major maintenance mea-

sures sufficiently due to budget constraints. At the same time,

investment needs are driven by technological advances, higher

quality requirements, and necessary modernizations. The

Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)

estimates that the investment gap at German hospitals is

about € 37 billion.

The number of hospitals in 2013 was 1,996 and the

number of beds was 500,671. For further figures on the Ger-

man hospital market please see the table below.

Fresenius Helios is the leading hospital operator in Ger-

many, with a market share of about 6%. The hospitals of

Fresenius Helios compete mainly with individual hospitals or

local and regional hospital associations. Among private hospi-

tal chains, our main competitors are Asklepios, Rhön-Klinikum,

and Sana Kliniken.

For the increase in reimbursements of hospital treat-

ments the so-called change in value figure is relevant. It is

used to compensate for rising costs in the hospital market,

particularly with regard to personnel and material costs. The

change in value figure is determined each year again for the

following year. For the year 2014 it was 2.81%.

In 2013, the post-acute care market in Germany com-

prised of 1,187 clinics with a total of 166,889 beds. Of these,

nearly two-thirds (65.2%) were in private preventive or post-

acute care clinics, 16.3% were in independent non-profit

clinics, and 18.5% in public clinics. The number of treated

patients decreased nationwide by about 11,000 to 1.95 mil-

lion. The average length of stay declined slightly and was

25.3 days (2012: 25.5 days).

1 Most recent data available on the German hospital market from German Federal Statistical Office 2 Total costs, gross of the German hospitals less academic research and teaching

Sources: German Federal Statistical Office 2014; German Hospital Institute (DKI), Krankenhaus Barometer 2014; OECD Health Data 2014; Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Krankenhaus Rating Report 2014

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tHe mARket foR pRojects AnD seRvices foR

HospitALs AnD otHeR HeALtH cARe fAciLities

The market for projects and services for hospitals and other

health care facilities is very fragmented. Therefore, an over-

all market size cannot be determined. The market is country-

specific and depends, to a large extent, on factors such as

public health care policies, government regulation, levels of

privatization, economic conditions, and demographics.

In markets with established health care systems and

mounting cost pressure, the challenge for hospitals and other

health care facilities is to increase their efficiency. Here,

demand is especially high for sustainable planning and

energy-efficient construction, optimized hospital processes,

and the outsourcing of medical-technical support services

to external specialists. This enables hospitals to concentrate

on their core competency − treating patients. In emerging

markets, the focus is on building and developing infrastruc-

ture and improving the level of health care.

Fresenius Vamed is one of the world’s leading companies

in this market. The company has no competitors that cover

its comprehensive portfolio of services across the entire life

cycle worldwide. Competitors offer only parts of Fresenius

Vamed’s service portfolio. Depending on the service, the com-

pany competes with international companies and consortia

as well as with smaller local providers.

oveRALL BUsiness DeveLopment

tHe mAnAgement BoARD’s Assessment of tHe

effect of geneRAL economic DeveLopments

AnD tHose in tHe HeALtH cARe sectoR foR

fReseniUs

Overall, the development of the world economy had an only

negligible impact on our industry in 2014. On the whole,

the health care sector, both in mature and growth markets,

developed positively, with continued increasing demand for

health services. This had a positive effect on our business

development.

tHe mAnAgement BoARD’s Assessment of tHe

BUsiness ResULts AnD significAnt fActoRs

Affecting opeRAting peRfoRmAnce

The Management Board is of the opinion that the Fresenius

Group’s performance in 2014 was successful. Fresenius

Medical Care achieved organic sales growth of 5%. Despite

the rebasing of Medicare’s reimbursement rate in the United

States, Fresenius Medical Care’s EBIT was at the previous

year’s level. Fresenius Kabi achieved organic sales growth of

4% and EBIT 1 of € 873 million. EBIT 1 was influenced by

the lower sales of HES blood volume substitutes as well as

by the easing of IV drug shortages in the United States.

Fresenius Helios increased sales by 55%. The strong increase

was mainly due to the first-time consolidation of the acquired

hospitals from Rhön-Klinikum AG. The integration of the

acquired hospitals is progressing as planned. Organic sales

growth of Fresenius Helios was 4%. The company increased

EBIT 2 significantly by 42% to € 553 million. Fresenius

Vamed increased sales slightly by 2%. Due to project delays

in Russia and Ukraine organic sales growth was flat. EBIT

grew by 7% to € 59 million.

1 Before special items2 2014 before special items

For a detailed overview of special items please see the reconciliation table on page 66. The special items are reported in the Group Corporate / Other segment.

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compARison of tHe ActUAL BUsiness ResULts

WitH tHe foRecAsts

For 2014, we had assumed that strong demand for our prod-

ucts and services would continue despite ongoing cost-

containment efforts in the health care sector. This proved to

be the case.

The table below shows our initial guidance for 2014 as

communicated in February 2014. In May, we provided more

details on the outlook for Fresenius Kabi. In July, we were

able to increase the forecast for Group sales based on acqui-

sitions at Fresenius Medical Care. In addition, we forecast

that the newly acquired hospitals would make a contribution

to sales at Fresenius Helios of € 1.8 billion. In addition, EBIT 1

including the acquired hospitals of € 540 to € 560 million

was expected for Fresenius Helios. In November, we adjusted

the forecast for organic sales growth of Fresenius Vamed

due to project delays in Russia and Ukraine. The outlook for

the EBIT margin 2 at Fresenius Kabi was set at around 17%

at this time.

The forecast for the currency-adjusted sales growth of

14% to 16% was achieved by Fresenius Group. At 16%, this

was at the upper end of the target range. net income (before

special items) 3 increased by 4% in constant currency and

was fully within the targeted range of 2% to 5%.

ACHIEVED GROUP TARGETS 2014

Targets for 2014 announced

in February 2014

Guidance announced

in May 2014

Guidance announced in July 2014

Guidance announced

in November 2014Achieved in

2014

Group

Sales (growth, in constant currency) 12% – 15% 1 14% – 16% 2 16%

Net income 3 (growth, in constant currency) 2% – 5% 4%

Fresenius Medical Care 4

Sales ~ US$ 15.2 bn US$ 15.8 bn 6

Net income 5 US$ 1.0 bn – US$ 1.05 bn US$ 1.05 bn 7

Fresenius Kabi 8

Sales (growth, organic) 3% – 7% 4% – 6% 4%

EBIT margin 16% – 18% 16.5% – 18% ~ 17% 17%

Fresenius Helios 9

Sales (growth, organic) 3% – 5% 4%

Sales contribution acquired hospitals ~ € 1.8 bn € 1.8 bn

EBIT € 390 m – € 410 m 10 € 540 m – € 560 m 11 € 553 m 11

Fresenius Vamed

Sales (growth, organic) 5% – 10% 0% 0%

EBIT (growth) 5% – 10% 7%

1 Includes acquisition of hospitals from Rhön-Klinikum AG 2 Includes acquisition of hospitals from Rhön-Klinikum AG and acquisitions at Fresenius Medical Care 3 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2014 before integration costs (hospitals of Rhön-Klinikum AG € 41 million;

Fenwal € 33 million) and disposal gains (two HELIOS hospitals € 21 million; Rhön stake € 34 million); 2013 before integration costs for Fenwal (€ 40 million). 4 This outlook excludes sales of approximately US$ 500 million from acquisitions.

Potential cost savings before income taxes of up to US$ 60 million are not included in the outlook for 2014. 5 Net income attributable to the shareholders of Fresenius Medical Care AG & Co. KGaA 6 Including acquisitions 7 Including cost savings from the global efficiency program 8 Before integration costs for Fenwal (2014: € 50 million; 2013: € 54 million). 9 Before integration costs (hospitals of Rhön-Klinikum AG € 51 million) and disposal gains (two HELIOS hospitals € 22 million).10 Excluding acquired Rhön hospitals 11 Including acquired Rhön hospitals

1 2014 before special items2 Before special items3 Net income attributable to the shareholders of Fresenius SE & Co. KGaA


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Management Report64

Fresenius invested € 1,345 million in property, plant and

equipment (2013: € 1,073 million). That was well in line with

the budgeted level of about 6% as percentage of sales.

operating cash flow was € 2,585 million (2013: € 2,320

million). The cash flow margin was 11.1% (2013: 11.4%)

and hence slightly above our expectations. We had expected

to achieve a cash flow margin between 9% and 11%.

Group net debt / eBitDA was 3.41 1 (3.26 1 at 2014 aver-

age exchange rates for both net debt and EBITDA) and thus

above the targeted range of 3.0 to 3.25, mainly due to the

acquisitions at Fresenius Medical Care in the fourth quarter

of 2014.

Group ROIC was 7.5% 1 (2013: 8.8% 2), and Group ROOA

was 9.1% 1 (2013: 10.6% 2) and hence as expected below the

level of 2013.

ResULts of opeRAtions, finAnciAL position, Assets AnD LiABiLities

ResULts of opeRAtions

salesIn 2014, we increased Group sales by 16% in constant cur-

rency and by 14% at actual rates to € 23,231 million (2013:

€ 20,331 million). The chart on the right shows the various

influences on Fresenius’ Group sales.

In 2014, the main effects of changes in product mix took

place in the first half of the year at Fresenius Kabi as a result

of lower sales of blood volume substitutes based on hydroxy-

ethyl starch (HES).

price effects were seen at Fresenius Medical Care. Medi-

care reimbursement rates decreased slightly in 2014. In addi-

tion, price cuts made in China in February 2013 continued to

have an impact at Fresenius Kabi in the first quarter of 2014.

In 2015, we expect no significant effects from changes in

product mix. However, we expect pricing effects for Fresenius

Kabi and Fresenius Medical Care. The Medicare reimburse-

ment rate in the United States will also remain virtually

unchanged in 2015.

sales growth by region was as follows:

The most important regions in the Group are North Amer-

ica and Europe, contributing 40% and 44% of total sales,

respectively, followed by Asia-Pacific with 9%, and Latin Amer-

ica and Africa with 5% and 2%, respectively. Germany con-

tributed 27% to Group sales.

In North America, organic sales growth was 4%. In con-

stant currency, sales increased by 8%. In Europe, organic sales

growth was 3% (24% in constant currency). In the Asia-Pacific

region, organic sales growth was 6% (16% in constant cur-

rency). Strong organic sales growth of 10% was achieved in

Latin America (15% in constant currency). In Africa organic

sales growth was 2% (2% in constant currency).

SALES BY REGION

€ in millions 2014 2013 ChangeOrganic

sales growth

Currency translation

effectsAcquisitions /

divestitures% of total

sales

North America 9,307 8,620 8% 4% 0% 4% 40%

Europe 10,162 8,216 24% 3% 0% 21% 44%

Asia-Pacific 2,205 1,945 13% 6% - 3% 10% 9%

Latin America 1,186 1,174 1% 10% - 14% 5% 5%

Africa 371 376 - 1% 2% - 3% 0% 2%

total 23,231 20,331 14% 4% - 2% 12% 100%

1 Pro forma acquisitions; before special items2 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary agreement for the acquisition of hospitals

and outpatient facilities of Rhön-Klinikum AG; before special items

14%

SALES GROWTH ANALYSIS

4%

12% 0% - 2%

Organic sales growth

Acquisitions Divestitures Currency Total sales growth

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sales growth in the business segments was as follows:

▶ Fresenius Medical Care achieved sales of € 11,917 million

in 2014 (2013: € 11,000 million). Organic sales growth

was 5%, while acquisitions contributed 5%. Divestitures

had no effect on sales growth. Currency translation had

a negative effect of 2%.

▶ Fresenius Kabi increased sales by 3% to € 5,146 million

(2013: € 4,996 million). Sales growth was affected by

lower sales of HES blood volume substitutes as well as by

easing of IV drug shortages in the United States. The

company achieved organic sales growth of 4%. Acquisi-

tions contributed 1% to sales growth. Divestitures had no

effect. Currency translation had a negative effect of 2%.

▶ Fresenius Helios increased sales by 55% to € 5,244 mil-

lion (2013: € 3,393 million). The strong increase is due

to the first-time consolidation of the acquired hospitals

from Rhön-Klinikum AG contributing € 1,791 million. An

increase in admissions and price increases for hospital

services contributed to organic sales growth of 4%. Dives-

titures reduced sales growth by 2%.

▶ Fresenius Vamed increased sales by 2% to € 1,042 mil-

lion (2013: € 1,020 million). Due to project delays in Rus-

sia and Ukraine organic sales growth was flat. Acquisi-

tions contributed 2% to sales growth. Sales in the project

business decreased by 4% to € 558 million (2013: € 583

million). Sales in the service business grew by 11% to

€ 484 million (2013: € 437 million). order intake in the

project business again developed well; it increased by

13% to € 840 million (2013: € 744 million), mainly driven

by the modernization contract with the University Hos-

pital Schleswig-Holstein in Germany. Fresenius Vamed

increased its order backlog by 23% to € 1,398 million

(December 31, 2013: € 1,139 million). Fresenius Vamed

is the only business segment within the Fresenius Group

whose business is significantly determined by order

intake and order backlog.

earnings structuregroup net income (before special items) 1 rose by 3% to

€ 1,086 million (2013: € 1,051 million). Growth in constant

currency was 4%. earnings per share (before special

items) 1 rose to € 2.01 (2013: € 1.96 2). This represents an

SALES BY BUSINESS SEGMENT

€ in millions 2014 2013 Change

Organic sales

growth

Currency translation

effectsAcquisitions /

divestitures% of total

sales

Fresenius Medical Care 11,917 11,000 8% 5% - 2% 5% 51%

Fresenius Kabi 5,146 4,996 3% 4% - 2% 1% 22%

Fresenius Helios 5,244 3,393 55% 4% 0% 51% 23%

Fresenius Vamed 1,042 1,020 2 % 0% 0% 2% 4%

ORDER INTAKE AND ORDER BACKLOG − FRESENIUS VAMED

€ in millions 2014 2013 2012 2011 2010

Order intake 840 744 657 604 625

Order backlog (December 31) 1,398 1,139 987 845 801

1 Net income attributable to shareholders of Fresenius SE & Co. KGaA2 Adjusted for 1 : 3 share split in 2014


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Management Report66

increase of 3% at actual rates and of 3% in constant currency.

The weighted average number of shares was 540.3 million.

Including special items, Group net income attributable to

shareholders of Fresenius SE & Co. KGaA increased by 6%

to € 1,067 million (2013: € 1,011 million). Earnings per share

increased by 4% to € 1.97 (2013: € 1.89 1).

Inflation had no significant effect on results of operations

in 2014.

group eBitDA 2 increased by 5% to € 4,095 million (2013:

€ 3,888 million). This corresponds to an increase of 6% in con-

stant currency. group eBit 2 increased by 4% to € 3,158 mil-

lion (2013: € 3,045 million). This corresponds to an increase

of 4% in constant currency.

eBit development by business segment was as follows:

▶ Fresenius Medical Care’s EBIT was € 1,697 million (2013:

€ 1,699 million) and hence on previous year’s level (con-

stant currency: 0%). The EBIT margin was 14.2% (2013:

15.4%). The decrease of the margin is mainly due to the

rebasing of Medicare’s reimbursement rate in the United

States.

▶ Fresenius Kabi’s EBIT 2 decreased to € 873 million (2013:

€ 926 million). Lower sales of HES blood volume substi-

tutes and the easing of IV drug shortages in the United

States had an adverse effect. Currency translation had

a negative effect of 2%. The EBIT 2 margin was 17.0%

(2013: 18.5%).

▶ Fresenius Helios increased EBIT 3 by 42% to € 553 million

(2013: € 390 million). The strong increase is due, among

other reasons, to the first-time consolidation of the acquired

hospitals from Rhön-Klinikum AG. The EBIT 3 margin was

10.5% (2013: 11.5%). The EBIT 3 margin decline is due to

the newly acquired hospitals.

▶ Fresenius Vamed increased EBIT by 7% to € 59 million

(2013: € 55 million). The EBIT margin was 5.7% (2013:

5.4%).

Reconciliation to group net incomeThe Group’s U.S. GAAP financial results as of December 31,

2014 and as of December 31, 2013 comprise special items.

Net income attributable to shareholders of Fresenius SE & Co.

KGaA was adjusted for these special items. The table below

shows the special items and the reconciliation from net income

(before special items) to earnings according to U.S. GAAP.

RECONCILIATION

1 Adjusted for 1 : 3 share split in 20142 Before special items3 2014 before special items

For a detailed overview of special items please see the reconciliation table on this page. The special items are reported in the Group Corporate / Other segment.

€ in millions

Q1 – 4 / 2014 (before special items)

Fenwal integration

costs

Integra tion costs for acquired

Rhön hospitals

Disposal gain from two

HELIOS hospitals

Disposal gain from Rhön-

stake 1

Q1 – 4 / 2014 according to

U.s. gAAp (incl. special

items)

Q1 – 4 / 2013 (before special items)

Fenwal integration

costs

Q1 – 4 / 2013 according to

U.S. GAAP (incl. special

items)

sales 23,231 23,231 20,331 20,331

eBit 3,158 - 50 - 51 22 35 3,114 3,045 - 54 2,991

Interest result - 602 - 602 - 584 - 584

net income before taxes 2,556 - 50 - 51 22 35 2,512 2,461 - 54 2,407

Income taxes - 725 17 10 - 1 - 1 - 700 - 683 14 - 669

net income 1,831 - 33 - 41 21 34 1,812 1,778 - 40 1,738

Less noncontrolling interest - 745 - 745 - 727 - 727

net income 2 1,086 - 33 - 41 21 34 1,067 1,051 - 40 1,011

1 Fresenius sold its 5% stake in Rhön-Klinikum AG in June 2014. Fresenius acquired the stake in 2012 as part of its takeover bid for Rhön-Klinikum AG.2 Net income attributable to the shareholders of Fresenius SE & Co. KGaA

The costs are reported in the Group Corporate / Other segment.

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Development of other major items in the statement of incomegroup gross profit rose to € 6,842 million, exceeding the pre-

vious year’s gross profit of € 6,383 million by 7% (8% in con-

stant currency). The increase is primarily due to the first-time

consolidation of hospitals acquired from Rhön-Klinikum AG

and acquisitions at Fresenius Medical Care. The gross margin

was 29.5% (2013: 31.4%). The cost of sales rose by 18% to

€ 16,389 million (2013: € 13,948 million). Cost of sales as a

percentage of Group sales increased to 70.5% in 2014, com-

pared to 68.6% in 2013. selling, general, and administrative

expenses consisted prima rily of personnel costs, marketing

and distribution costs, and depreciation and amortization.

These expenses rose by 10% to € 3,359 million (2013: € 3,044

million), mainly due to the first-time consolidation of acquisi-

tions. Their ratio as a percentage of Group sales decreased

to 14.5% (2013: 15.0%). R & D expenses remained nearly

unchanged at € 369 million (2013: € 348 million). With 5% they

are within the targeted range of approximately 4% to 5%

of our product sales. Depreciation and amortization was

€ 937 million (2013: € 843 million). The ratio as a percentage

of sales was 4.0% (2013: 4.1%). Group personnel costs

increased to € 8,996 million (2013: € 7,360 million). The

personnel cost ratio was 38.7% (2013: 36.2%). The chart

above shows the earnings structure in 2014.

group net interest increased to - € 602 million (2013:

- € 584 million). This was due to higher incremental debt for

the full year due to acquisitions. Favorable financing condi-

tions had a positive effect on Group net interest.

STATEMENT OF INCOME (SUMMARY)

€ in millions 2014 2013 ChangeChange in

constant currency

sales 23,231 20,331 14% 16%

Cost of goods sold - 16,389 - 13,948 - 18% - 19%

Gross profit 6,842 6,383 7% 8%

Selling, general, and administrative expenses - 3,359 - 3,044 - 10% - 12%

Research and development expenses - 369 - 348 - 6% - 7%

EBIT (operating result) 3,114 2,991 4% 5%

Net interest - 602 - 584 - 3% - 4%

Income taxes - 700 - 669 - 5% - 6%

Noncontrolling interest in profit - 745 - 727 - 2% - 3%

net income (before special items) 1 1,086 1,051 3% 4%

Net income 1 1,067 1,011 6% 6%

Earnings per ordinary share in € (before special items) 1 2.01 1.96 2 3% 3%

Earnings per ordinary share in € 1 1.97 1.89 2 4% 5%

EBITDA 4,051 3,834 6% 6%

Depreciation and amortization 937 843 11% 12%

1 Net income attributable to the shareholders of Fresenius SE & Co. KGaA2 Adjusted for 1 : 3 share split in 2014


EARNINGS STRUCTURE (BEFORE SPECIAL ITEMS)

100% 70.4%

16.0%29.6% Group gross profit margin

13.6% EBIT margin

Sales Cost of sales

Operating expenses

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The group tax rate (before special items) was 28.4% and

above the prior-year level (2013: 27.8%). The Group tax rate of

2014 was impacted by special tax effects at Fresenius Medical

Care. On the one hand, the tax rate was increased by the rever-

sal of an original tax benefit following a financial court ruling

issued against another company. On the other hand, the tax

rate was favorably influenced by the resolution of challenged

deductions for civil settlement payments taken in prior years.

The Group tax rate of 2013 was positively influenced by the

nearly entirely tax exempted disposal gain of Calea France.

noncontrolling interest increased to € 745 million (2013:

€ 727 million). Of this, 94% was attributable to the noncon-

trolling interest in Fresenius Medical Care.

The table below shows the profit margin development

in 2014.

finAnciAL position

financial management policies and goalsThe financing strategy of the Fresenius Group has the follow-

ing main objectives:

▶ Ensure financial flexibility

▶ Optimize the weighted-average cost of capital

Ensuring financial flexibility is key to the financing strategy of

the Fresenius Group. This is achieved through a broad spec-

trum of financing instruments, taking market capacity, investor

diversification, utilization flexibility, credit covenants, and

the current maturity profile into consideration. The Group’s

maturity profile is characterized by a broad spread of maturi-

ties with a large proportion of mid- to long-term financing.

We also take into account the currency in which our earnings

and cash flows are generated when selecting the financing

instruments, and match them with appropriate debt structures

in the respective currencies. The Group’s main debt financing

instruments are illustrated in the chart on page 69.

Sufficient financial cushion is assured for the Fresenius

Group by unused syndicated and bilateral credit lines. In addi-

tion, Fresenius SE & Co. KGaA has a commercial paper pro-

gram. The Fresenius Medical Care receivable securitization

program offers additional financing options.

Another main objective of Fresenius Group’s financing

strategy is to optimize the weighted-average cost of capital

by employing a balanced mix of equity and debt. Due to the

Company’s diversification within the health care sector and

the strong market positions of the business segments in global,

growing, and non-cyclical markets, predictable and sustain-

able cash flows are generated. These allow for a reasonable

proportion of debt, i. e., the use of a comprehensive mix of

financial instruments. A capital increase may also be consid-

ered in exceptional cases to ensure long-term growth, for

example to finance a major acquisition.

In line with the Group’s structure, financing for Fresenius

Medical Care and the rest of the Fresenius Group is con-

ducted separately. There are no joint financing facilities and

in % 2014 2013 2012 2011 2 2010

EBITDA margin 1 17.6 19.1 20.0 19.8 19.1

EBIT margin 1 13.6 15.0 15.9 15.7 15.1

Return on sales (before taxes and noncontrolling interest) 3 11.0 12.1 12.5 12.4 11.6

1 2013 – 2014 before special items; 2012 before one-time costs (€ 6 million) related to the offer to the shareholders of Rhön-Klinikum AG as well as other one-time costs (€ 86 million) at Fresenius Medical Care

2 2011 sales were adjusted by - € 161 million according to a U.S. GAAP accounting change; this solely relates to Fresenius Medical Care North America.3 2013 – 2014 before special items; 2012 before a non-taxable investment gain (€ 109 million) and other one-time costs (€ 86 million) at Fresenius Medical Care

as well as one-time costs (€ 41 million) related to the offer to the shareholders of Rhön-Klinikum AG; 2009 – 2011 before the effects of mark-to-market accounting of the Mandatory Exchangeable Bonds and the Contingent Value Rights


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no mutual guarantees. The Fresenius Kabi, Fresenius Helios,

and Fresenius Vamed business segments are financed pri-

ma rily through Fresenius SE & Co. KGaA, in order to avoid any

structural subordination.

financingFresenius meets its financing needs through a combination

of operating cash flows generated in the business segments

and short-, mid-, and long-term debt. In addition to bank

loans, important financing instruments include the issuance

of Senior Notes, Euro Notes, a commercial paper program,

and a receivable securitization program.

financing activities during the past fiscal year were

mainly related to the acquisition of hospitals from Rhön-Klini-

kum AG and acquisitions at Fresenius Medical Care. In addi-

tion, financing measures were implemented to increase our

financial flexibility, to further impove terms and conditions as

well as to extend the Company’s maturity profile.

▶ In January 2014, Fresenius Finance B.V. placed Senior

Notes in the amount of € 750 million. The coupon of

the € 300 million tranche due in 2019 was 2.375% at an

issue price of 99.647%. The € 450 million tranche due

in 2021 had a coupon of 3.00% and was issued at a price

of 98.751%. Also in January 2014, Fresenius issued

Senior Notes in the amount of € 300 million with a matu-

rity of 10 years and a coupon of 4.00% at par. These were

increased by € 150 million in February 2014 at a price

of 102%.

▶ In February 2014, Senior Notes in the amount of US$ 300

million with a maturity of 7 years were issued. The notes

have a coupon of 4.25% and were issued at par. The net

proceeds of the Senior Notes issued in January and Febru-

ary 2014 were used to repay a Bridge Financing Facility

that had been entered into in connection with the acquisi-

tion of hospitals from Rhön-Klinikum AG.

▶ Also in February 2014, the incremental facilities under

the 2013 credit agreement in the amount of € 1.2 billion

were disbursed. These had been agreed on in November

2013 and were also used to finance the acquisition of

hospitals from Rhön-Klinikum AG.

▶ In March 2014, Fresenius SE & Co. KGaA issued € 500 mil-

lion of equity-neutral convertible bonds due in 2019. The

bonds were issued at par. The coupon is 0%. The initial

conversion price has been set at a premium of 35% above

the reference price of the Fresenius shares. The conver-

sion price was adjusted after the dividend payment in May

and the capital increase carried out in August from com-

pany funds and amounts to € 49.7249. To fully cover the

financial risks of the conversion right embedded in the con-

vertible bonds, the company simultaneously purchased

call options on its shares. The net proceeds were used to

finance the acquisition of hospitals from Rhön-Klinikum AG.

▶ In April and July 2014, Fresenius SE & Co. KGaA issued

Euro Notes totalling € 500 million in various tranches with

fixed and variable interest rates. The proceeds were used

primarily to refinance maturing Euro Notes.

FINANCING MIx OF THE FRESENIUS GROUP

Equity-neutral convertible bonds 5%

Other financial liabilities 6%

Euro Notes 7%

Syndicated loans 32%

Senior Notes 50%

Dec. 31, 2014: € 15,454 million

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▶ In September 2014, Fresenius Medical Care AG & Co. KGaA

issued equity-neutral convertible bonds in the amount of

€ 400 million maturing in 2020. The issue was made at

par. The coupon is 1.125%. The initial conversion price has

been set at a premium of 35% above the reference price

of the shares of Fresenius Medical Care AG & Co. KGaA and

amounts to € 73.6448. To fully cover the financial risks

of the conversion right embedded in the convertible bonds,

Fresenius Medical Care simultaneously purchased call

options on its shares. The net proceeds were used for gen-

eral corporate purposes.

▶ In October 2014, Fresenius Medical Care US Finance II,

Inc. placed US$ 900 million of Senior Notes. The coupon

for the US$ 500 million tranche due in 2020 is 4.125%,

and the coupon for the US$ 400 million tranche due in

2024 is 4.75%. Both tranches were issued at par. The net

proceeds were used to repay a short-term loan from the

Fresenius Medical Care 2012 Credit Agreement and other

short-term debt as well as for acquisitions and general

corporate purposes.

▶ In November 2014, Fresenius Medical Care AG & Co. KGaA

extended the 2012 syndicated credit facility by two years

and expanded it to a facility of approximately US$ 4.4 bil-

lion. It matures in October 2019 and includes revolving

credit facilities amounting to US$ 1 billion and € 400 mil-

lion and loans of US$ 2.5 billion and € 300 million. As

part of an amendment to the agreement, its terms were

improved and certain loan covenants for Fresenius Medical

Care were simplified. The increased credit facility will be

used to finance general corporate purposes, among other

things.

▶ In addition, in November 2014, Fresenius Medical Care

extended the maturity of its receivables securitization pro-

gram in the amount of US$ 800 million to November 2017.

At the same time, its terms were improved. This transac-

tion, coupled with amendment of Fresenius Medical Care’s

2012 credit agreement, contributed to the extension of

the company’s debt maturity profile.

The chart above shows the maturity profile of the Fresenius

Group.

Fresenius SE & Co. KGaA has a commercial paper pro-

gram under which up to € 1 billion in short-term notes can be

issued. As of December 31, 2014, the commercial paper pro-

gram was not utilized.

FINANCIAL POSITION – FIVE-YEAR OVERVIEW

€ in millions 2014 2013 2012 2011 2010


as % of sales 11.1 11.4 12.6 10.3 12.0

Working capital 1 5,448 4,571 4,470 4,067 3,577

as % of sales 23.5 22.5 23.2 24.9 22.4

Investments in property, plant and equipment, net 1,323 1,047 952 758 733

Cash flow before acquisitions and dividends 1,262 1,273 1,486 931 1,178

as % of sales 5.4 6.3 7.7 5.7 7.4

1 Trade accounts receivable and inventories, less trade accounts payable and payments received on accounts

MATURITY PROFILE OF THE FRESENIUS GROUP

FINANCING FACILITIES 1

€ in millions

1 As of December 31, 2014, major long-term financing instruments; pro forma incl. amended 2013 Credit Agreement in February 2015

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

4,800

4,400

4,000

3,600

3,200

2,800

2,400

2,000

1,600

1,200

800

400

0

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The Fresenius Group has drawn about € 5.5 billion of bilat-

eral and syndicated credit lines. In addition, as of December

31, 2014, the Group had approximately € 3.3 billion in unused

credit lines available (including committed credit lines of

about € 2.6 billion). These credit facilities are generally used

for covering working capital needs and – with the exception

of the syndicated credit agreements of Fresenius SE & Co. KGaA

and Fresenius Medical Care − are usually unsecured.

As of December 31, 2014, both Fresenius SE & Co. KGaA

and Fresenius Medical Care AG & Co. KGaA, including all

subsidiaries, complied with the covenants under its debt

arrangements.

Detailed information on the Fresenius Group’s financing

can be found on pages 129 to 139 of the Notes. Further infor-

mation on financing requirements in 2015 is included in the

outlook section on page 81.

effect of off-balance-sheet financing instruments on our financial position and liabilitiesFresenius is not involved in any off-balance-sheet transactions

that could, or will, have a significant impact on its financial

position, expenses or income, results of operations, liquidity,

investments, assets and liabilities, or capitalization.

Liquidity analysisIn 2014, key sources of liquidity were operating cash flows

and short-, mid-, and long-term debt. Cash flow from oper-

ations is influenced by the profitability of the business of

Fresenius and by net working capital, especially accounts

CASH FLOW STATEMENT (SUMMARY)

€ in millions 2014 2013 Change margin

Earnings after tax 1,812 1,738 4%

Depreciation and amortization 937 843 11%

Change in pension provisions 93 27 --

cash flow 2,842 2,608 9% 12.2%

Change in working capital - 257 - 288 11%

operating cash flow 2,585 2,320 11% 11.1%

Property, plant and equipment - 1,345 - 1,071 - 26%

Proceeds from the sale of property, plant and equipment 22 24 - 8%

cash flow before acquisitions and dividends 1,262 1,273 - 1% 5.4%

Cash used for acquisitions / proceeds from disposals - 2,028 - 2,556 21%

Dividends - 582 - 491 - 19%

cash flow after acquisitions and dividends - 1,348 - 1,774 24%

Cash provided by / used for financing activities (without dividends paid) 1,625 1,796 - 10%

Effect of exchange rate changes on cash and cash equivalents 34 - 43 179%

change in cash and cash equivalents 311 - 21 --

The detailed cash flow statement is shown in the consolidated financial statements.

CASH FLOW IN € MILLIONS

Cash flow Change in working capital

Operating cash flow

Capex, net Cash flow (before acqs. +

dividends)

Acquisitions + dividends

Cash flow (after acqs. + dividends)

2,842 - 257

2,585 - 1,323

- 2,610

- 1,348

1,262

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receivable. Cash flow can be generated from short-term bor-

rowings through the sale of receivables under the Fresenius

Medical Care accounts receivable securitization program, by

using the commercial paper program, and by drawing on

bilateral bank credit agreements. Mid- and long-term fund-

ing are mostly provided by the syndicated credit facilities of

Fresenius SE & Co. KGaA and Fresenius Medical Care, and by

Senior Notes. Fresenius is convinced that its existing credit

facilities, inflows from Senior Note issuances, as well as the

operating cash flows and additional sources of short-term

funding, are sufficient to meet the Company’s foreseeable

liquidity needs.

DividendThe general partner and the Supervisory Board will propose a

dividend increase to the Annual General Meeting. For 2014,

a dividend of € 0.44 per share is proposed. This is an increase

of about 6%. The total dividend distribution will increase by

about 6% to € 238.3 million (2013: € 224.6 million).

cash flow analysis Cash flow was € 2,842 million (2013: € 2,608 million). The

change in working capital was - € 257 million (2013: - € 288 mil-

lion), mainly due to business expansion and acquisitions.

operating cash flow was € 2,585 million in 2014 (2013:

€ 2,320 million). The cash flow margin was 11.1% (2013:

11.4%). The decrease relates primarily to the payment for the

W.R. Grace bankruptcy settlement of US$ 115 million. Oper-

ating cash flow was more than sufficient to meet all financing

needs for investing activities excluding acquisitions, whereby

cash used for capital expenditure was € 1,345 million, and

proceeds from the sale of property, plant and equipment were

€ 22 million (2013: € 1,071 million and € 24 million, respec-

tively).

cash flow before acquisitions and dividends was € 1,262

million (2013: € 1,273 million). This was sufficient to finance

the Group dividends of € 582 million. Group dividends con-

sisted of dividend payments of € 225 million to the sharehold-

ers of Fresenius SE & Co. KGaA, payments of € 232 million

by Fresenius Medical Care to its shareholders, and dividends

paid to third parties of € 198 million (primarily relating to

Fresenius Medical Care). These payments were offset by

the dividend of € 73 million, which Fresenius SE & Co. KGaA

received as a shareholder of Fresenius Medical Care. Net

acquisition expenditures of € 2,028 million were financed by

cash flow and by debt.

The cash inflow from financing activities (without dividend

payments) was € 1,625 million (2013: € 1,796 million). In

2014, it was predominantly characterized by debt financing

of acquisitions of Fresenius Helios and Fresenius Medical

Care and refinancing measures. Cash and cash equivalents as

of December 31, 2014 were € 1,175 million (December 31,

2013: € 864 million).

investments and acquisitionsIn 2014, the Fresenius Group continued its growth path and

invested € 3,795 million (2013: € 3,827 million). investments

in property, plant and equipment increased to € 1,345 million

(2013: € 1,073 million). At 5.8% of sales (2013: 5.3%), this

was well above the depreciation level of € 937 million and

serves as the basis for enabling expansion and preserving the

Company’s value over the long term. A total of € 2,450 million

was invested in acquisitions (2013: € 2,754 million). Of the

total capital expenditure in 2014, 35% was invested in prop-

erty, plant and equipment, 65% was spent on acquisitions.

INVESTMENTS, OPERATING CASH FLOW, DEPRECIATION AND

AMORTIZATION IN € MILLIONS – FIVE-YEAR OVERVIEW

758

639644

1,9111,689

3,172

2,754

2,450

674776

843937

1,0071,073

1,3451,612

783

2,438 2,320

2,585

2010 2011 2012 2013 2014

investments Acquisitions operating cash flow Depreciation and amortization

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The table below shows the distribution of investments by

business segment. The chart on the right shows the regional

breakdown.

The cash outflows for acquisitions is primarily related to

the following business segments:

Fresenius Medical Care invested primarily in the acquisi-

tion of companies to expand the business in medical services

related to dialysis.

Fresenius Kabi acquired a pharmaceutical company in

Brazil, among others, to expand its business in generic

IV drugs.

Fresenius Helios acquired 41 hospitals from Rhön-Klini-

kum AG.

The main investments in property, plant and equipment were

as follows:

▶ optimization and expansion of production facilities, pri-

marily in North America and Europe for Fresenius Medical

Care, and for Fresenius Kabi, primarily in Europe, the

United States, and Asia

▶ modernization of existing, and equipping of new, dialysis

clinics at Fresenius Medical Care

▶ new building and modernization of hospitals at Fresenius

Helios. The most significant individual projects were the

hospitals in Northeim, Schleswig, and Krefeld

Investments in property, plant and equipment of € 227 million

will be made in 2015, to continue with major ongoing invest-

ment projects on the reporting date. These are investment

obligations mainly for hospitals at Fresenius Helios as well as

investments to expand and optimize production facilities for

Fresenius Medical Care and Fresenius Kabi. These projects

will be financed from operating cash flow.

Assets AnD LiABiLities

Asset and liability structureThe total assets of the Group rose by 22% to € 39,897 million

(Dec. 31, 2013: € 32,758 million). In constant currency, this

was an increase of 15%. This increase is mainly attributable

to the first-time consolidation of hospitals acquired from

Rhön-Klinikum AG, acquisitions at Fresenius Medical Care,

and currency effects. Inflation had no significant impact on

the assets of Fresenius in 2014.

INVESTMENTS BY BUSINESS SEGMENT


Thereof property, plant and

equipmentThereof

acquisitions Change % of total

Fresenius Medical Care 2,196 987 701 1,495 122% 58%

Fresenius Kabi 479 448 361 118 7% 12%

Fresenius Helios 1,090 2,357 266 824 - 54% 29%

Fresenius Vamed 22 27 10 12 - 19% 1%

Corporate / Other 8 8 7 1 0% 0%

total 3,795 3,827 1,345 2,450 - 1% 100%

€ in millions 2014 2013 Change

Investment in property, plant and equipment 1,345 1,073 25%

thereof maintenance 42% 49%

thereof expansion 58% 51%

Investment in property, plant and equipment as % of sales 5.8 5.3

Acquisitions 2,450 2,754 - 11%

total investments and acquisitions 3,795 3,827 - 1%

INVESTMENTS AND ACQUISITIONS

INVESTMENTS BY REGION

Other regions 7%

North America 34%

Asia-Pacific 9%

Europe 50%

2014: € 1,345 million

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current assets increased to € 10,028 million (Dec. 31, 2013:

€ 7,972 million). The increase is mainly due to acquisitions.

Within current assets, trade accounts receivable increased

by 22% to € 4,235 million (Dec. 31, 2013: € 3,474 million).

At 65 days, average days sales outstanding was slightly above

the previous year’s level of 63 days.

inventories rose by 16% to € 2,333 million (Dec. 31, 2013:

€ 2,014 million). The scope of inventory in 2014 decreased

to 52 days (Dec. 31, 2013: 53 days). The ratio of inventories to

total assets decreased to 5.8% (Dec. 31, 2013: 6.1%).

non-current assets increased by 21% to € 29,869 million

(Dec. 31, 2013: € 24,786 million). In constant currency, the

increase was 13%. Additions to property, plant and equipment,

and acquisitions (especially the first-time consolidation of

hospitals acquired from Rhön-Klinikum AG) had an effect. The

goodwill in the amount of € 19,868 million (Dec. 31, 2013:

€ 14,826 million) has proven sustainable. The goodwill from

acquisitions was € 3,650 million as of December 31, 2014.

Please see page 125 ff. of the Notes for further information.

shareholders’ equity, including noncontrolling interest,

rose by 17% to € 15,483 million (Dec. 31, 2013: € 13,260 mil-

lion). In constant currency shareholders’ equity, including

noncontrolling interest rose by 10%. group net income attrib-

utable to Fresenius SE & Co. KGaA increased shareholders’

equity by € 1,067 million. The equity ratio, including noncon-

trolling interest, was 38.8% as of December 31, 2014 (Dec. 31,

2013: 40.5%).

The liabilities and equity side of the balance sheet shows

a solid financing structure. Total shareholders’ equity, includ-

ing noncontrolling interest, covers 52% of non-current assets

(Dec. 31, 2013: 53%). Shareholders’ equity, noncontrolling

interest, and long-term liabilities cover all non-current assets

and 96% of inventories.

Long-term liabilities increased by 28% to € 16,629 mil-

lion as of December 31, 2014 (Dec. 31, 2013: € 13,003 million).

short-term liabilities increased by 18% to € 7,104 million

(Dec. 31, 2013: € 6,023 million).

The Group has no accruals that are of material signifi-

cance as individual items. The largest single accrual (US$ 115

million), for the W.R. Grace settlement payment relating to

the NMC transaction in 1996, was utilized in the first quar-

ter of 2014. Please see page 152 f. of the Notes for further

information.

group debt rose by 21% to € 15,454 million (Dec. 31,

2013: € 12,804 million). In constant currency, the increase was

13%. The increase is mainly due to the hospitals acquired

from Rhön-Klinikum AG, the acquisitions at Fresenius Medical

Care, as well as to currency effects. Its relative weight in

the balance sheet was 39% (Dec. 31, 2013: 39%). Approxi-

mately 48% of the Group’s debt is in U.S. dollars. Liabilities

due in less than 1 year were € 1,668 million (Dec. 31, 2013:

€ 1,820 million), while liabilities with a remaining term of 1 to

5 years and over 5 years were € 13,786 million (Dec. 31, 2013:

€ 10,984 million).

The net debt to equity ratio including noncontrolling

interest (gearing) is 92% (Dec. 31, 2013: 74% 1). The return

on equity after taxes (equity attributable to shareholders of

Fresenius SE & Co. KGaA) was 11.6% 2 (Dec. 31, 2013: 12.8% 2).

The return on total assets after taxes and before noncontrol-

ling interest decreased to 4.6% (2013: 5.8%).

ASSETS AND LIABILITIES – FIVE-YEAR OVERVIEW

€ in millions 2014 2013 2012 2011 2010

Total assets 39,897 32,758 30,664 26,321 23,577

Shareholders’ equity 1 15,483 13,260 12,758 10,577 8,844

as % of total assets 1 39 41 42 40 38

Shareholders’ equity 1 / non-current assets, in % 52 53 57 55 52

Debt 15,454 12,804 11,028 9,799 8,784

as % of total assets 39 39 36 37 37

Gearing in % 92 74 2 80 87 91

1 Including noncontrolling interest2 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary arrangement for the acquisition

of hospitals and outpatient facilities of Rhön-Klinikum AG

1 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary agreement for the acquisition of hospitals and outpatient facilities of Rhön-Klinikum AG

2 Before special items

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Group ROIC was 7.5% 1 (2013: 8.8% 2), and Group ROOA was

9.1% 1 (2013: 10.6% 2). The earnings growth corresponds

with an increase in total assets. This increase is a result of the

expansion of the existing business and acquisitions. Within

the position invested capital, the goodwill of € 19.9 billion

had a significant effect on the calculation of ROIC. It is impor-

tant to take into account that approximately 60% of the good-

will is attributable to the strategically significant acquisi-

tions of National Medical Care in 1996, Renal Care Group

and HELIOS Kliniken in 2006, APP Pharmaceuticals in 2008,

Liberty Dialysis Holdings in 2012, and hospitals of Rhön-

Klinikum AG in 2014. Those have significantly strengthened

the competitive position of the Fresenius Group.

The summary shows ROIC and ROOA by business segment:

In 2014, the Fresenius Group delivered a return on invested

capital (ROIC) of 7.5%, substantially exceeding our cost

of capital. The WACC (weighted average cost of capital) of

Fresenius Medical Care was 6.0%, the WACC of the other

business segments was 4.9%.

The return on assets for 2014 was calculated before spe-

cial items.

Roic RooA

in % 2014 2013 2014 2013

Fresenius Medical Care 1 6.8 7.7 9.7 10.5

Fresenius Kabi 2 8.6 9.9 10.5 11.9

Fresenius Helios 3 7.0 9.0 7.4 9.3

Fresenius Vamed 4 – – 11.2 11.6

Group 2, 3 7.5 8.8 9.1 10.6

1 2014 pro forma acquisitions2 Before special items3 2014 pro forma acquisitions, before special items; 2013 pro forma excluding advances

made in the amount of € 2.18 billion under a fiduciary arrangement for the acquisition of hospitals and outpatient facilities of Rhön-Klinikum AG

4 ROIC: Invested capital is insignificant due to prepayments, cash and cash equivalents.

currency and interest risk managementThe nominal value of all foreign currency hedging contracts

was € 2,061 million as of December 31, 2014. These con-

tracts had a market value of - € 50 million. The nominal value

of interest rate hedging contracts was € 691 million. These

contracts had a market value of - € 7 million. Please see the

Risk Report on pages 89 f. and the Notes on pages 160 to 167

for further details.

coRpoRAte RAting

The credit quality of Fresenius is assessed and regularly

reviewed by the leading rating agencies Moody’s, Standard &

Poor’s, and Fitch.

The table shows the company rating of Fresenius SE & Co.

KGaA as well as the rating actions of Standard & Poor’s und

Moody’s from January 2015.

RATING OF FRESENIUS SE & CO. KGAA

feb. 24, 2015 Dec. 31, 2014 Dec. 31, 2013

Standard & Poor’s

Corporate Credit Rating BBB - BB + BB +

Outlook stable positive positive

Moody’s

Corporate Credit Rating Ba1 Ba1 Ba1

Outlook stable negative negative

Fitch

Corporate Credit Rating BB + BB + BB +

Outlook positive positive watch

evolving

Dec. 31, 2014 2 Dec. 31, 2013 1 Dec. 31, 2012 2 Dec. 31, 2011 Dec. 31, 2010

Debt / EBITDA 3.7 2.7 2.8 3.0 2.9

Net debt / EBITDA 3.4 2.5 2.6 2.8 2.6

EBITDA / interest ratio 6.8 6.7 5.8 6.1 5.4

1 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary arrangement for the acquisition of hospitals and outpatient facilities of Rhön-Klinikum AG; before special items

2 Pro forma acquisitions; before special items

1 Pro forma acquisitions, before special items2 Pro forma excluding advances made in the amount of € 2.18 billion under a fiduciary arrangement for the acquisition

of hospitals and outpatient facilities of Rhön-Klinikum AG

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SUBSEQUENT EVENTS

Fresenius announced on January 12, 2015, that its pharma-

ceutical manufacturing facility in Grand Island, N.Y., has

achieved the upgraded status of “voluntary action indicated”

(VAI) following an inspection in October 2014. The status

change is an improvement from the “official action indicated”

status the facility had been operating under. The new VAI

classification permits FDA approval of new Fresenius Kabi

products at the plant.

On January 16, 2015, Standard & Poor’s upgraded the cor-

porate credit rating of Fresenius from BB + to BBB - with a

stable outlook. The upgrade reflects Fresenius’ enhanced sta-

bility – derived from overall critical mass coupled with sound

diversification and leading positions in non-cyclical markets –

rather than a shift in its financial policy.

On February 12, 2015, Fresenius SE & Co. KGaA refinanced

the revolving credit facilities and the term loan A tranches

under the 2013 Senior Credit Agreement in a total amount of

approximately € 3 billion. The maturity was extended by two

years to June 28, 2020.

On February 16, 2015, Fresenius Kabi has sold its German

subsidiary CFL GmbH to NewCo Pharma GmbH. Fresenius

Kabi will remain active in compounding. In Germany the focus

will be on parenteral nutrition products. In 2014, CFL had

sales of € 77 million. The transaction did not result in a mate-

rial book gain or loss.

Besides the items mentioned, there were no significant

changes in the Fresenius Group’s operating environment fol-

lowing the close of fiscal year 2014. No other events of mate-

rial importance on the assets and liabilities, financial position,

and results of operations of the Group have occurred after

the close of the year.

OVERALL ASSESSMENT OF THE

BUSINESS SITUATION

At the time this Group Management Report was prepared,

the Management Board continued to assess the development

of the Fresenius Group as positive. Demand for our prod-

ucts and serv ices continues to grow steadily around the world.

Operating performance in the first weeks of 2015 has been

in line with our expectations.

OUTLOOK

This Management Report contains forward-looking statements,

including statements on future sales, expenses, and invest-

ments, as well as potential changes in the health care sector,

our competitive environment, and our financial situation.

These statements were made on the basis of the expectations

and assessments of the Management Board regarding events

that could affect the Company in the future, and on the basis

of our mid-term planning. Such forward-looking statements are

subject, as a matter of course, to risks, uncertainties, assump-

tions, and other factors, so that the actual results, including

the financial position and profitability of Fresenius, could

therefore differ materially – positively or negatively – from

those expressly or implicitly assumed or described in these

statements. For further information, please see our Opportu-

nities and Risk Report on pages 83 ff.

GENERAL AND MID-TERM OUTLOOKThe outlook for the Fresenius Group for the coming years con-

tinues to be positive. We are continuously striving to optimize

our costs, to adjust our capacities to be able to treat patients

and supply customers reliably, and to improve our product mix

as well as to expand our products and services business. We

expect these efforts to increase our earnings in the coming

years. In addition, good growth opportunities for Fresenius

are, above all, presented by the following factors:

▶ The sustained growth of the markets in which we oper-

ate: Fresenius sees still very good opportunities to benefit

from the growing health care needs arising from aging

populations and technical advances, but driven also by the

still insufficient access to health care in the developing

and emerging countries. There are above-average growth

opportunities for us not only in the markets of Asia and

Latin America, but also in Eastern Europe. Efficient health

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77Management Report Subsequent events / Overall assessment of the business situation / Outlook

care systems with appropriate reimbursement structures

will evolve over time in these countries, as economic con-

ditions improve. We will strengthen our activities in these

regions and introduce further products from our portfolio

into these markets successively.

▶ The expansion of our regional presence: The fast-grow-

ing markets in Asia-Pacific, Latin America, and Eastern

Europe especially offer further potential for increasing our

market shares. China, for instance, offers excellent growth

opportunities over the long term, not only in infusion

and nutrition therapies, IV drugs, and medical devices for

Fresenius Kabi, but also for Fresenius Medical Care in

dialysis. We plan to further roll out products and therapies

from our existing portfolio in countries where we do not

yet offer a comprehensive range.

▶ The broadening of our services business: For Fresenius

Medical Care, opportunities to extend into new markets or

to expand its market share arise if a country opens up

to private dialysis providers or allows cooperation between

public and private providers through public private-part-

nerships. Whether or not private companies can offer dial-

ysis treatment, and in what form, depends on the health

care system of the country in which they operate and its

legal framework. We see developments in this regard in

Germany, China, and India, among other countries. In

addition to dialysis products and the treatment of dialysis

patients, Fresenius Medical Care sees significant growth

potential in the future in medical services related to dialysis

and in expanding the coordination of care. This includes

laboratory services, the supply of the necessary vascular

access devices, and in-patient care of dialysis patients,

among other things. Comprehensive integrated care from

a single provider should ensure better-coordinated and

controlled treatment steps and minimize complications,

thus helping prevent additional hospitalization to the great-

est degree possible. The goal, then, is to further increase

the quality of care and to reduce the overall cost of treat-

ment. With the acquisition of hospitals from Rhön-Klinikum

AG, Fresenius Helios has an extensive nationwide hospital

network. Based on this platform, Fresenius Helios aims

to develop and offer innovative, integrated care offerings.

▶ The broadening of our products business: At Fresenius

Medical Care, we see renal pharmaceuticals as growth

drivers. They complement our dialysis portfolio and add

to the horizontal expansion of our portfolio. They offer

further growth potential in line with our strategic goals and

the growing trend to offering more integrated care. At

Fresenius Kabi, we plan to expand our IV drugs product

business. We develop generic drug formulations that are

ready to launch at the time of market formation, directly

after the patents of the branded products expire.

▶ The development of innovative products and therapies:

These will create the potential to further expand our

market position in the regions. In addition to innovation,

best-in-class quality, reliability, and the convenience of

our products and therapies are key factors here. In our dial-

ysis business, we expect home therapies to gain further

importance, leading to growth potential for Fresenius

Medical Care. Home dialysis and the corresponding tech-

nologies and products will continue to be a major focus

of our R & D activities. In addition, Fresenius Kabi is devel-

oping new dosage forms for its products.

▶ Selective acquisitions: Besides retaining organic sales

growth as the basis for our business, we will continue to

utilize oppor tunities to grow by making small and mid-

sized acquisitions that expand our product portfolio and

strengthen our regional presence.

We are also exploiting any opportunities for tapping poten-

tial within our operations for cost-management and effi-

ciency-enhancement measures. These include plans for cost-

efficient production and a further-optimized procurement

process. Thus, Fresenius Medical Care launched a global effi-

ciency program in 2014. This program is intended to increase

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the efficiency of the entire organization and enhance compet-

itiveness and investment capacity. The program is expected

to produce cost savings of US$ 300 million per year by 2017.

The outlook takes account of all events known at the time

the annual financial statements were prepared that could

influence our operating performance in 2015 and beyond. Sig-

nificant risks are discussed in the Risk Report. As in the past,

we will do our utmost to achieve and – if possible – exceed

our targets.

FUTURE MARKETSWe expect the consolidation process to continue among com-

petitors in our markets in Europe, Asia-Pacific, and Latin

America. Consequently, we expect that there will be opportu-

nities for us to penetrate new markets, both by expanding

our regional presence and by extending our product portfolio.

New markets will open up as Fresenius Medical Care

successively rolls out its product and services portfolio, espe-

cially in emerging countries. In addition, Fresenius Medical

Care continues to expand its Care Coordination business with

services related to dialysis. With Care Coordination, Fresenius

Medical Care can address the needs of dialysis patients even

more comprehensively.

Fresenius Kabi plans to introduce products already

offered outside the United States into that country as well. It

also aims to further roll out its product portfolio interna-

tionally, especially in the fast-growing markets of Asia-Pacific

and Latin America.

With its extended hospital network across Germany,

Fresenius Helios is now able to develop new patient care

models. In addition, the company expects that there will

be further growth opportunities arising from privatizations

in the German hospital market.

Fresenius Vamed is expecting to grow in the life cycle

and PPP project areas, both with regard to the project and

the services business. Moreover, the company intends to fur-

ther expand its position with follow-up orders, as well as to

enter new target markets.

HEALTH CARE SECTOR AND MARKETSThe health care sector is considered to be widely indepen-

dent of economic cycles. The demand, especially for life-

saving and life-sustaining products and services, is expected

to increase, given that they are medically needed and the

population is aging. Moreover, medical advances and the large

number of diseases that are still difficult to cure – or are

incurable – are expected to remain growth drivers.

In the emerging countries, the availability of basic health

care and the growing demand for high-quality medical treat-

ment is increasing. As per-capita income increases, individu-

als increasingly have to cope with the illnesses associated

with lifestyle diseases.

On the other hand, experts estimate that further financial

constraints in the public sector could result in more pricing

pressure and a slowdown in revenue for companies in the

health care industry. Some countries are experiencing signifi-

cant financing problems in the health care sector due to the

strained public finance situation. Especially in the industrial-

ized countries, increased pressure to encourage saving can

be expected as health care costs constitute a large portion of

the budget.

It will be increasingly important for companies to increase

patient benefit, to improve treatment quality, and to offer

preventive therapies. In addition, especially those products and

therapies that are not only medically but also economically

advantageous will be of increasing importance.

Industry experts believe that, despite of the challenges, the

sector will also see a comparatively solid financial perfor-

mance in the foreseeable future.

THE DIALYSIS MARKET

The global dialysis market is expected to growth by about

4% at constant exchange rates, to approximately US$ 80 bil-

lion in 2015.

The number of dialysis patients worldwide is expected

to rise by approximately 6% in 2015, although significant

regional differences will remain. For the United States, Japan,

and the countries of Central and Western Europe, where

prevalence is already relatively high, we forecast patient

growth in the region of 1% to 4%. In economically weaker

Source: Bank research

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79Management Report Outlook

regions, the growth rates are even higher with values of up to

10%, and in some countries even more. We expect a higher

proportion of dialysis patients in Asia, Latin America, Eastern

Europe, the Middle East, and Africa. The fact that more than

80% of the world’s population lives in these regions under-

scores the strong growth potential for the entire spectrum of

dialysis services and products.

Factors such as aging populations and the growing number

of people suffering from diabetes and hypertension, which

are ailments often preceding terminal kidney failure, are con-

tributing toward continued growth of the dialysis markets.

The age expectancy of dialysis patients is also rising thanks to

ongoing advances in treatment quality and the rising stan-

dard of living, especially in the emerging countries. Therefore,

a continuing increase in the worldwide prevalence can be

expected.

Further information is provided on pages 59 ff. of the

Management Report.

THE MARKET FOR GENERIC IV DRUGS, CLINICAL

NUTRITION, INFUSION THERAPY, AND MEDICAL

DEVICES / TRANSFUSION TECHNOLOGY 1

We expect the global market for generic IV drugs, clinical

nutrition, infusion therapy, and medical devices / transfusion

technology to grow by approximately 4% in 2015.

The market for generic IV drugs in Europe and the

United States is expected to grow by about 5% in 2015. The

demand for generic drugs is likely to grow because of their

significantly lower price. The growth dynamic will continue to

be driven by originator drugs going off-patent. A factor work-

ing in the opposite direction is the price erosion for generic

drugs that are already in the market.

Growth of about 3% is expected for the clinical nutrition

market in Europe in 2015. However, given the financial con-

straints in these countries, the efforts to contain costs in the

health care sector are being pursued undiminished. Contin-

ued high growth potential is projected in Asia-Pacific, Latin

America, and Africa. We expect growth of up to 10% in

selected regions.

We expect the market for infusion therapy in Europe to

remain at the prior year’s level in 2015. Besides a stagnat-

ing blood volume substitutes market due to restrictions

imposed on the use of these products, continuous price pres-

sure in the tender-driven standard-solutions business is

expected to affect growth. Outside Europe, growth of up to

4% is expected.

The worldwide market for medical devices / transfusion

technology is expected to grow by up to 3% in 2015.

THE GERMAN HOSPITAL MARKET

We expect the acute care hospital market in Germany to again

grow slightly in 2015. Admissions are forecast to increase

by approximately 1%.

For the increase in reimbursements of hospital treat-

ments the so-called change in value figure is relevant. For 2015

it was set at 2.53%. In addition, the hospital funding system

provides for various increases and reductions for acute hospi-

tals. For example, a reduction of 25% had to be accepted

for surplus services previously agreed upon with the health

insurance companies. A reduction of 65% applies to surplus

services not agreed upon. To compensate the reduction, a

0.8% extra charge on invoiced hospital treatments is provided.

We expect the effect of the compensations, reduced by the

reductions for extra services, to have a slightly positive effect

on the result of HELIOS in 2015.

In December 2014, a benchmark paper for a hospital

reform was presented. It stipulates that in the future, planning

and compensation in the hospital sector should be geared

more toward the quality of medicine, among other factors. So

far, however, no specifics regarding this reform have been

determined. Thanks to its clear focus on the quality and trans-

parency of medical results, the HELIOS Group would be well

prepared for such a development.

Despite higher revenues, the expectations of the hospitals

are rather pessimistic with respect to their economic situa-

tion in 2015. According to the Krankenhaus-Barometer 2014

1 Market data refer to Fresenius Kabi’s relevant and addressable markets. Those are subject to annual volatility due to currency fluctuations and patent expiries of original drugs in the IV drug market, among other things.

Source: Company research

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survey by the German Hospital Institute (DKI), almost 40%

of the hospitals expect their economic situation to worsen.

Specifically personnel costs will be a burden due to tariff in-

creases. Moreover, investment needs are growing while gov-

ernment support is declining. The Rheinisch-Westfälisches

Institut für Wirtschaftsforschung (RWI) forecasts that more

hospitals will respond to economic pressures by joining

together into networks and bundling their services. Networks

offer opportunities for individual hospitals to reduce costs,

for example in purchasing.

We therefore anticipate that privatization and consolida-

tion will continue in the German hospital market.

THE MARKET FOR PROjECTS AND SERVICES

FOR HOSPITALS AND OTHER HEALTH CARE

FACILITIES

For 2015, we expect the worldwide demand for projects

and services for hospitals and other health care facilities to

grow at a low single-digit rate.

In the Central European markets with established health

care systems, we expect solid growth. The demand for proj-

ects and services for hospitals and other health care facilities

will continue to grow due to demographic changes and the

rising investment and modernization needs of public health

facilities. The focus is on services ranging from the mainte-

nance and repair of medical and hospital equipment, facility

management, and technical operation, through to total oper-

ational management and infrastructure process optimization –

especially within the framework of public-private partnership

(PPP) models. Additional growth opportunities are presented

by an increasing number of non-medical services, which are

outsourced from public facilities to private service providers.

In the emerging markets we anticipate an overall dynamic

development. Growth in markets such as Africa, Latin America,

and southeast Asia will initially be driven by the demand for

efficient, needs-oriented medical care. In China and the Middle

East, growth will be driven by the development of infrastruc-

ture and the creation of new care services, as well as research

and training facilities.

GROUP SALES AND EARNINGSIn 2015, we expect to increase Group sales by 7% to 10% in

constant currency. Besides organic sales growth, sales growth

will be driven by the full-year consolidation of the acquired

hospitals from Rhön-Klinikum AG and the acquisitions by

Fresenius Medical Care in 2014. We expect to increase

Group net income 1 by 9% to 12% in constant currency.

GROUP FINANCIAL TARGETS

SALES AND EARNINGS BY BUSINESS SEGMENTIn 2015, we expect sales and earnings development in our

business segments as shown below:

FINANCIAL TARGETS BY BUSINESS SEGMENT

Targets 2015 Fiscal year 2014


Sales growth 1 5% – 7% US$ 15.832 bn

Net income 1, 2 growth 0% – 5% US$ 1.045 bn

Fresenius Kabi

Sales growth (organic) 3% – 5% € 5,146 m

EBIT growth(in constant currency) 4% – 6% € 873 m

Fresenius Helios

Sales growth (organic) 3% – 5% € 5,244 m

EBIT € 630 – 650 m € 553 m

Fresenius Vamed

Sales growth (organic) Single-digit % € 1,042 m

EBIT growth 5% – 10% € 59 m

1 Savings from the global efficiency program and further operating cost investments within the Care Coordination business are included, while potential acquisitions are not taken into account.

2 Net income attributable to the shareholders of Fresenius Medical Care AG & Co. KGaA

Targets 2015 Fiscal year 2014

Sales growth (in constant currency) 7% – 10% € 23,231 m

Net income 1 growth (in constant currency) 9% – 12% € 1,086 m

Capital expenditure ~ 6% of sales € 1,345 m

DividendProfit-driven

dividend policyProposal

+ 6% per share

1 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2015 before integration costs (~ € 10 million before tax for hospitals acquired from Rhön-Klinikum AG), before costs for the efficiency program at Fresenius Kabi (~ € 100 million before tax) and before the gain from the divestment of two HELIOS hospitals (€ 34 million before tax); 2014 before special items

1 Net income attributable to shareholders of Fresenius SE & Co. KGaA; 2015 before integration costs (~ € 10 million before tax for hospitals acquired from Rhön-Klinikum AG), before costs for the efficiency program at Fresenius Kabi (~ € 100 million before tax) and before the gain from the divestment of two HELIOS hospitals (€ 34 million before tax); 2014 before special items

Source: Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Krankenhaus Rating Report 2013

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81Management Report Outlook

For 2015, Fresenius Medical Care expects sales to grow by

5% to 7%, and expects moderate EBIT growth. Net income

attributable to shareholders of Fresenius Medical Care AG &

Co. KGaA is expected to increase 0% to 5%. Savings from

the global efficiency program for 2015 and further operating

cost investments within the Care Coordination business

are included, while potential acquisitions are not taken into

account. The outlook is based on the exchange rates prevail-

ing at the beginning of 2015.

Fresenius Kabi expects organic sales growth of 3% to 5%

for 2015. In addition, the business segment is forecasting

an EBIT growth in constant currency of 4% to 6%. Fresenius

Kabi initiated a program designed to increase production

efficiency and streamline administrative structures. The com-

pany expects costs of approximately € 100 million before

tax in 2015. The program is expected to lead to cost savings of

approximately € 10 million in 2015. Fresenius Kabi’s guid-

ance excludes the costs for the efficiency program (approxi-

mately € 100 million before tax). For segment reporting pur-

poses, these costs will not be reported in the Fresenius Kabi

segment but as special items in the Group segment Corpo-

rate / Other.

Fresenius Helios projects organic sales growth of 3% to

5% for 2015. EBIT is expected to increase to € 630 to € 650

million. The outlook for Fresenius Helios is excluding integra-

tion costs for the hospitals acquired from Rhön-Klinikum AG

(approximately € 10 million before tax) and gains from the

divestment of two HELIOS hospitals (€ 34 million before tax).

For segment reporting purposes, these costs will not be re-

ported in the Fresenius Helios segment but as special items in

the Group segment Corporate / Other.

For 2015, Fresenius Vamed expects to achieve single-

digit organic sales growth and EBIT growth of 5% to 10%.

FINANCINGFor 2015, we expect continued strong cash flow with a cash

flow margin between 9% and 11%.

In addition, unused credit lines under syndicated or

bilateral credit facilities from banks will generally provide us

with a sufficient financial cushion.

In 2015, the financing activities will predominantly

involve the refinancing of the Fresenius US Finance II, Inc.

US$ 500 million and € 275 million Senior Notes, which will

be due in July 2015.

At the end of 2015, we expect Group net debt / EBITDA

to be at approximately 3.0 (calculated at expected annual

average exchange rates, on the basis of current exchange

rates, for both net debt and EBITDA; without major acquisi-

tions; before special items).

INVESTMENTSIn 2015, we expect to invest about 6% of sales in property,

plant and equipment. About 50% of the capital expenditure

planned will be invested at Fresenius Medical Care, about

25% at Fresenius Kabi, and about 25% at Fresenius Helios.

At Fresenius Medical Care, investments will primarily be

used for the expansion of production capacity, optimizing pro-

duction costs, and the establishment of new dialysis clinics.

Fresenius Kabi will primarily invest in expanding and main-

taining production facilities as well as in introducing new

manufacturing technologies. At Fresenius Helios, we will pri-

marily be investing in the new building, the modernizing and

equipping of existing hospitals, and in the hospitals acquired

during the fiscal year from Rhön-Klinikum AG.

The regional focus of the Group’s investment spending

will be on Europe and North America, which will account for

about 55% and 30%, respectively. The remainder will be

invested in Asia, Latin America, and Africa. About 40% of total

funds will be invested in Germany.

We assume that the return on operating assets (ROOA)

and the return on invested capital (ROIC) will be approximately

above the level of 2014.

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PROCUREMENTWe will continue optimizing our procurement management

in 2015; prices, terms, and especially quality are key factors

for securing further earnings growth.

Based on the developments in the financial and the real

markets, we assume that price fluctuations will continue

despite tension easing in the commodities markets in the

short and medium terms.

RESEARCH AND DEVELOPMENT Our R & D activities will continue to play a key role in secur-

ing the Group’s long-term growth through innovations and

new therapies.

We plan to increase the Group’s R & D spending in 2015.

About 4% to 5% of our product sales will be reinvested in

research and development.

Market-oriented research and development with strict

time-to-market management processes is crucial for the suc-

cess of new products. We continually review our R & D results

using clearly defined milestones. Innovative ideas, product

development, and therapies with a high level of quality will

continue to provide the basis for future market-leading posi-

tions. Given the continued cost-containment efforts in the

health care sector, cost-efficiency combined with a strong qual-

ity focus is acquiring ever-greater importance in product

development, and in the improvement of treatment concepts.

At Fresenius Medical Care we will continue to expand

our global R & D product platform. Home dialysis as well as

associated technologies and products will be a focal point of

our activities. One major aim is to significantly reduce water

consumption for home hemodialysis in order to give dialysis

patients the greatest-possible independence and mobility

with a resource-efficient and flexible device. We will continue

to expand our range of innovative products and technolo-

gies in the future to react to growth opportunities – also with

the aim of best meeting demand for integrated care.

Infusion and nutrition therapies and generic parenteral prod-

ucts are primary focus areas of development at Fresenius

Kabi. In particular, we are concentrating on being in a posi-

tion to offer the corresponding generic drug formu lation

promptly upon the expiration of patents for originator drugs.

We are also working to expand our portfolio to include addi-

tional ready-to-use IV drugs.

The Fresenius Kabi portfolio of medical devices makes a

contribution to the safe and effective application of infusion

solutions and clinical nutrition. We will continue to develop

new products and improve on existing ones in this segment.

In transfusion technology, we are focusing our development

work on devices and disposables that enable the safe, efficient,

and user-friendly production of blood products and the treat-

ment of specific diseases, including autoimmune diseases.

PLANNED CHANGES IN HUMAN RESOURCES AND THE SOCIAL AREAThe number of employees in the Group will continue to rise

in the future, as a result of the expected expansion. We antic-

ipate that the number of employees will increase to more

than 220,000 (December 31, 2014: 216,275). The number of

employees is expected to increase in all business segments.

The regional distribution of our employees will remain almost

unchanged – approximately 50% will be located in Europe,

approximately 30% in North America, and approximately

20% in Asia-Pacific, Latin America, and Africa.

DIVIDENDThe dividend increases provided by Fresenius in the last

21 years show impressive continuity. Our dividend policy

aims to align dividends with earnings per share growth

(before special items) and thus broadly maintains a pay-out

ratio of 20% to 25%. Based on our positive earnings fore-

cast, we expect to offer our shareholders an earnings-linked

dividend.

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Management Report Opportunities and risk report 83

OPPORTUNITIES AND RISK REPORT

The Fresenius Group is exposed to a number of risks due to

the complexity and the dynamics of its business. These risks

are inevitable consequences of entrepreneurial activities. The

willingness to take risks has to be accommodated if opportu-

nities are to be exploited.

As a provider of products and services for the severely and

chronically ill, we are relatively independent of economic

cycles. The diversification into four business segments, which

operate in different segments of the health care market, and

the global footprint further minimize the Group’s risk profile.

Our experience, as well as our strong market positions, serve

as a solid basis for a reliable assessment of risks.

At the same time, we will continue to take advantage of

the wide-ranging opportunities for sustainable growth and

expansion that the health care market offers to the Fresenius

Group.

OPPORTUNITIES MANAGEMENT Managing opportunities is an ongoing, integral part of corpo-

rate activity aimed at securing the Company’s long-term suc-

cess. In this way, we can explore new prospects and consoli-

date and improve on what we have already achieved. The

Group’s decentralized and regional organizational and man-

agement structure enables the early identification and analysis

of trends, requirements, and opportunities in our often frag-

mented markets; and we can respond to them flexibly and in

line with local market needs. Furthermore, we maintain regu-

lar contact and dialogue with research groups and scientific

institutions, and keep a close watch on markets and com-

petitors in order to identify opportunities. Within the Group,

opportunities and synergies can be exploited through con-

tinuous communication involving the exchange of information

and know-how between the business segments. Anticipated

future opportunities for the Fresenius Group are discussed in

the Outlook starting on page 76.

RISK MANAGEMENTThe risk management is also a continuous process. Identifying,

controlling, and managing risks are key tools of solid corpo-

rate governance. The Fresenius risk management system is

closely linked to the corporate strategy. Opportunities are not

recognized in the risk management system.

Responsibilities for the processes and monitoring risks in the

business segments have been assigned as follows:

▶ Using standardized processes, risk situations are evalu-

ated regularly and compared with specified requirements.

If negative developments emerge, responses can be initi-

ated at an early stage.

▶ The managers responsible are required to report any

relevant changes in the risk profile to the Management

Board without delay.

▶ Markets are kept under constant observation and close

contact is maintained with customers, suppliers, and insti-

tutions. These policies allow us to swiftly identify and

react to changes in our business environment.

The risk management system is supported both at Group level

and in the business segments by our risk controlling mea-

sures and our management information system. Detailed

monthly and quarterly reports are used to identify and ana-

lyze deviations of the actual compared to the planned busi-

ness development. In addition, the risk management system

comprises a control system that oversees organizational

processes and measures, as well as internal controls and

audits, with which we can identify significant risks at an early

stage and counteract each one individually.

The functionality and effectiveness of our risk manage-

ment system is reviewed regularly by the Management Board

and the internal auditing department. Conclusions arising

from the audits are taken into account in the ongoing refine-

ment of the system, to allow prompt reaction to changes in

our environment. This system has thus far proved effective.

The control system is also regularly reviewed by the Manage-

ment Board and the internal auditing department. Moreover,

the external auditor reviews whether the control system set

up by the Management Board is suitable for the early identi-

fication of risks that would put the continued exist ence of the

Company in danger. The insights gained from the audit

regarding the internal financial reporting controls are taken

into account in the continued development of the system.

Fresenius has ensured that the scope and focus of the

organizational structure and systems for identifying, assessing,

and controlling risks, and for developing countermeasures

and for the avoidance of risks, are aligned suitably with the

Company-specific requirements and that they are properly

functional. However, there can be no absolute certainty that

this will enable all risks to be fully identified and controlled.

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INTERNAL FINANCIAL REPORTING CONTROLS

Numerous measures and internal controls assure the correct-

ness and reliability of accounting processes and financial

reporting, and thus preparation of annual financial statements,

consolidated financial statements, and management reports

in compliance with applicable principles. Our four-tier report-

ing process especially promotes intensive discussion and

ensures control of the financial results. At each reporting level,

▶ local entity

▶ region

▶ business segment

▶ Group

financial data and key figures are reported, discussed, and

compared on a regular monthly basis with the prior-year

figures, budget, and latest forecast. In addition, all parame-

ters, assumptions, and estimates that are of relevance for

the externally reported Group and segment results are dis-

cussed intensively with the department responsible for prepar-

ing the Group’s consolidated financial statements. These

matters are also reviewed and discussed quarterly by the

Supervisory Board’s Audit Committee.

Control mechanisms, such as automated and manual rec-

onciliation procedures, are further precautions put in place

to assure that financial reporting is reliable and that transac-

tions are correctly accounted for. All consolidated entities

report according to Group-wide standards, which are deter-

mined at the head office. These are regularly adjusted to

allow for changes made to the accounting regulations. The

consolidation proposals are supported by the IT system. In

this context, reference is made to the comprehensive consoli-

dation of internal Group balances. To prevent abuse, we take

care to maintain a strict separation of functions. Management

control and evaluations also help to ensure that risks having

a direct impact on financial reporting are identified and that

controls are in place to minimize them. Moreover, changes

in accounting principles are monitored and employees involved

in financial reporting are instructed regularly and compre-

hensively. External experts and specialists are engaged if nec-

essary. The Treasury, Tax, Controlling, and Legal departments

are involved in supporting the preparation of the financial

statements. Finally, the information provided is verified once

again by the department responsible for preparing the con-

solidated financial statements.

Fresenius Medical Care is subject to the controls of Section

404 of the Sarbanes-Oxley Act.

RISK AREASThe main risk areas for the operations of the Fresenius Group

are as follows:

GENERAL ECONOMIC RISKS AND RISKS IN THE

GENERAL OPERATING FRAMEWORK

At present, the development of the global economy exhibits

no significant risk to the Fresenius Group. In 2015, we

largely expect overall economic growth to continue. More-

over, Fresenius is affected only to a small extent by general

economic fluctuations. We expect demand for our life-saving

and life-sustaining products and services to continue to

grow. Furthermore, Fresenius is striving for the firm balance

of its business in the main regions and between established

and emerging markets.

RISK MANAGEMENT

Audit Committee of Supervisory Board

Risk management / risk controlling / control systems of business segments and Group segment

Management Board

Risk management information system (status reports)

Group Controlling

Ad-hoc reporting – relevant changes of risk profile and new risks

Supervisory Board

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The risk situation for each business segment also depends

on the development of its markets. Country-specific political,

legal, and financial conditions are therefore monitored and

evaluated carefully, particularly in the current macro-economic

environment. This applies, for example, to countries with

budget problems as a result of the sovereign debt crisis, in par-

ticular with regard to our accounts receivables.

RISKS IN THE HEALTH CARE SECTOR

Risks related to changes in the health care market are of

major importance to the Fresenius Group. The main risks are

the development of new products and therapies and increased

product availability at competitors, the financing of health

care systems, and reimbursement in the health care sector.

In our largely regulated business environment, changes

in the law – also with respect to reimbursement – can have

decisive consequences for our business progress. This applies

especially in the United States where a large portion of our

sales are generated, and where changes in the reimbursement

system, for example, could have a considerable impact on

our business. Furthermore, a portion of our dialysis care busi-

ness in the United States is currently reimbursed by private

insurers or managed care organizations. If these organizations

enforce reductions in the reimbursement, it would significantly

reduce the revenues and earnings for the products and ser-

vices of Fresenius Medical Care.

The same applies to the hospital market in Germany, where

the DRG system (Diagnosis Related Groups) is intended to

increase the efficiency of hospitals while reducing health care

spending. The Company constantly monitors legis lative devel-

opments as well as discussions about ending dual financing

in the hospital sector. Patients are largely assigned to hospi-

tals by the public health and pension insurers. It is therefore

important for Fresenius Helios that the contracts between its

hospitals and the insurers and health care institutions are

maintained. We not only monitor legislative changes continu-

ally, but also work together with governmental health care

institutions.

Reductions in health care spending could also negatively

affect the pricing of Fresenius Kabi products.

Generally, our aim is to counter possible regulatory risks

through enhanced performance and cost reductions.

In the United States, almost all Fresenius Kabi injectable

pharmaceutical products are sold to customers through

arrangements with group purchasing organizations (GPOs)

and distributors. The majority of hospitals undertake con-

tracts with the GPO of their choice for their purchasing needs.

Currently, fewer than five GPOs control a large majority of

sales in the United States to hospital customers. Fresenius Kabi

currently derives a large percentage of its revenue in the

United States through a small number of GPOs, and expects

to continue to do so in the future. Fresenius Kabi has pur-

chasing agreements with the major GPOs. To maintain these

business relationships, Fresenius Kabi believes it needs to

be a reliable supplier, offer a comprehensive high-quality

product line, remain price-competitive, and comply with the

regulations of the U.S. Food and Drug Administration (FDA).

The GPOs also have purchasing agreements with other man-

ufacturers and the bidding process for products is highly

competitive. Most of the agreements Fresenius has with GPOs

in the United States can be terminated at short- or mid-term

notice. The main customers in the area of transfusion technol-

ogy are plasma companies and blood centers. There are four

major plasma companies serving the United States. Blood

centers in the United States are consolidating in response to

blood-conservation efforts at hospitals, which is having an

effect on pricing.

Cooperation with medical doctors and scientists allows

us to identify and support relevant technological innovations

and to keep abreast of developments in alternative treatment

methods. These enable us to evaluate and adjust our corpo-

rate strategy if necessary.

OPERATING RISKS

Our business and operations around the world are exposed

to a number of risks and to extensive regulation, which

include, among others:

▶ the quality, safety, and efficacy of medical and pharma-

ceutical products, supplies, and therapies

▶ the operation of hospitals, manufacturing facilities, and

laboratories

▶ the construction and management of health care facilities

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Management Report86

▶ the rate of, and accurate reporting and billing for, govern-

ment and third-party reimbursement

▶ compensation of medical directors and other financial

arrangements with physicians and other referral sources.

If Fresenius fails to comply with laws or regulations, this

may give rise to a number of legal consequences, including

monetary and administrative penalties, increased compli-

ance costs, complete or partial exclusion from governmental

programs, or a complete or partial curtailment of our autho-

rization to conduct business. Any of these consequences could

have a material adverse effect on our business, financial

condition, or results of operations.

In the following, the main risks for the Fresenius Group are

described.

Production, products, and servicesCompliance with product and manufacturing regulations is

ensured by our quality management systems in accordance

with the internationally recognized quality standard ISO 9001,

reflecting a large number of national and international regu-

lations. Application is ensured by internal standards such as

quality and work procedure manuals. Regular internal and

external audits are carried out at the Group’s production sites,

distribution companies, and dialysis clinics. These audits

test compliance with regulations in all areas – from manage-

ment and administration to production and clinical services

and patient satisfaction. Our production facilities comply with

the Good Manufacturing Practice (GMP) of the markets they

supply. Our facilities are audited by the FDA and other public

authorities. If observations are filed, the Company is required

to remedy these issues immediately, as during the inspec-

tions of our U.S. production facility in Grand Island or our pro-

duction facility in Kalyani, India, for example.

Non-compliance with the requirements of these author-

ities in our production facilities or at our suppliers could

lead to regulatory actions such as warnings, product recalls,

production interruptions, monetary sanctions, or delays in

new product approvals. Any of these regulatory actions could

adversely affect our ability to generate sales and result in

significant expenses.

Potential risks, such as those arising from the start-up of

new production sites or the introduction of new technolo-

gies, are countered through careful planning, regular analy-

sis, and continual progress reviews. Production capacities at

some of our manufacturing plants could be adversely affected

by events such as technical failures, natural disasters, regu-

latory rulings, or supply disruptions, e. g., of raw materials.

We counter the risk of poor-quality purchased raw materi-

als, semifinished products, and components mainly by requir-

ing our suppliers to meet strict quality standards. Besides

certification by external institutes and regular supplier audits,

this includes an exhaustive evaluation of advance samples

and regular quality controls. We only purchase high-quality

products with proven safety and suitability from qualified

suppliers that conform to our specifications and standards.

Performing medical treatments on patients in our hospi-

tals, rehabilitation clinics, and dialysis clinics presents inher-

ent risks. For example, disruptions to processes involve risks

for patients and the clinic. In addition, there are operational

risks, for example regarding hygiene and sterile conditions.

We counteract these risks with strict operating procedures,

continuous personnel training, and patient-oriented working

procedures. Furthermore, we are constantly striving to

improve the standard of patient treatment through our quality

management systems.

Further risks arise from increasing pressure on our prod-

uct prices, for example in tender businesses. On the pro-

curement side, we counter risks – which mainly involve pos-

sible price increases and the availability of raw materials

and goods – by appropriately selecting and working together

with our suppliers through long-term framework agreements

in certain purchasing segments and by bundling volumes

within the Group.

Under the Medicare bundled reimbursement system, pay-

ment for Erythropoietin stimulating agents (ESA) is gener-

ally included in the bundled rate. An interruption of supply or

material increases in the utilization or acquisition costs for

ESAs could materially affect sales and profitability adversely.

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Growing competition, among other things induced by the

re-entry of competitors in the US market for generic IV drugs

after production halts, could materially affect the future pric-

ing and sale of our products and services adversely. The intro-

duction of new products and services, or the development

of new technologies by competitors, could render one or more

of our products and services less competitive or even obso-

lete, and thus have a significant negative impact on future

sales, the prices of products, and our range of services. This

includes the introduction of generic or patented drugs by

competitors, which may have an impact on sales and opera-

tional results.

Generally, the health care markets are characterized by

price pressure, competition, and efforts to contain costs.

These could result in lower sales and adversely affect our busi-

ness, our financial position, and our operational results.

We counter the risks associated with Fresenius Vamed’s

project business through professional project management

and control, and with a proven system tailored to each busi-

ness activity for identifying, evaluating, and minimizing these

risks. This system consists of organizational measures, such

as standards for pricing-in risks already when preparing quo-

tations, risk assessment before accepting orders, regular

project controlling, and continual risk assessment updates. To

avert the risk of default, financial measures are taken, such

as checking creditworthiness and, usually, prepayments, let-

ters of credit, and secured credits.

Our operations are subject to strict governmental regula-

tory demands and controls. We must comply with these rules

and regulations, which monitor particularly the safety and

effectiveness of our medical products and services. Therefore,

it is of special importance to us that our compliance pro-

grams and guidelines are adhered to. Through compliance, we

aim to meet our own expectations and those of our partners,

and to orient our business activities to generally accepted stan-

dards and local laws and regulations.

The Corporate Compliance department reports to the Chief

Compliance Officer, who is the Management Board member

for Legal Affairs, Compliance, and Human Resources, and is

accountable for establishing and implementing guidelines

and procedures. A compliance officer has been appointed in

each business segment. He or she is supported by additional

compliance officers appointed based on organizational and

business structures. The Corporate Compliance department

supports the compliance officers at the business segment,

regional, and country levels.

These compliance programs and guidelines set binding

rules of conduct for our employees. We believe that we have

taken adequate measures to ensure that national and interna-

tional rules are observed and complied with.

Government reimbursement paymentsFresenius is subject to comprehensive government regula-

tion in nearly all countries. This is especially true in the

United States and Germany. In addition, Fresenius must com-

ply with general rules of law, which differ from country to

country. There could be far-reaching legal repercussions

should Fresenius fail to comply with these laws or regulations.

A large part of Group revenue derives from government

reimbursement programs. In 2014, approximately 31% of

Fresenius Medical Care’s sales were attributable to U.S. fed-

eral health care benefit programs, such as Medicare and

Medicaid (CMS). A reduction of reimbursement rates or reim-

bursed services could result in significantly lower sales and

operational results.

Effective 2011, Medicare implemented an end stage renal

disease (ESRD) prospective payment system (ESRD PPS),

which expanded the scope of the products and services cov-

ered by a bundled rate and resulted in lower reimbursement

per treatment than under the reimbursement system in place.

ESRD-related drugs with only an oral form are expected to

be reimbursed under the ESRD PPS starting in January 2016

with an adjusted payment amount to be determined by the

Secretary of Health and Human Services to reflect the addi-

tional cost to dialysis facilities of providing these medications.

The ESRD PPS payment amount is subject to annual adjust-

ment based on increases in the costs of a “market basket” of

certain health care items and services less a produc tivity

adjustment. The centers for Medicare and Medicaid Services,

however, did not increase ESRD PPS base rates for 2015.

Managem

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Management Report88

The American Taxpayer Relief Act of 2012 (ATRA) directed

CMS to reduce the ESRD PPS payment rate, effective January

1, 2014, to account for changes in the utilization of certain

drugs and biologicals that are included in the ESRD PPS. In

making such a reduction, the law requires CMS to use the most

recently available pricing data for such drugs and biologicals.

In November 2013, CMS issued the final rule regarding the

2014 ESRD PPS payment rate. CMS decided to split the settled

reduction of the ESRD PPS payment rate (US$ 29.93 reduc-

tion) over a period between three and four years (2014 – 2017).

In November 2014, CMS announced that the ESRD PPS pay-

ment rates for 2015 will amount to US$ 239.43 showing a

small increase of 0.2% compared to 2014.

The ESRD PPS’s quality incentive program (QIP) affects

Medicare payments based on the performance of each facil-

ity on a set of quality measures. Dialysis facilities that fail to

achieve the established quality standards have payments for

a particular year reduced by up to 2% based on a year’s per-

formance. For the 2014 payment year, CMS has adopted addi-

tional measures to determine whether dialysis patients are

receiving high-quality care. For the years 2015 and 2016, addi-

tional quality measures will be established. In October 2014,

CMS announced the requirements for the years 2017 and

2018, including further adjustments on the measures. A mate-

rial failure by Fresenius Medical Care to achieve the mini-

mum client quality standards under the QIP could materially

and adversely affect its business, financial condition, and

results of operations.

Fresenius Medical Care mitigated the impact of the ESRD

PPS and the other legislative initiatives referenced above

with two broad measures. First, it worked with medical direc-

tors and treating physicians to make clinical protocol changes

used in treating patients consistent with the QIP and good

clinical practices, and it negotiated pharmaceutical acquisition

cost savings. In addition, Fresenius Medical Care achieved

greater efficiencies and better patient outcomes by introducing

new initiatives to improve patient care upon initiation of dial-

ysis, increasing the percentage of patients using home thera-

pies, and achieving additional cost reductions in its clinics.

Working with health care provider groups, also known as ESRD

Seamless Care Organizations (ESCOs), CMS plans to test a

new Comprehensive ESRD Care Model, for payment and care

delivery that seeks to deliver better health outcomes for

ESRD patients while lowering CMS’s costs. ESCOs that achieve

the program’s minimum quality thresholds and generate

reductions in CMS’s cost of care above certain thresholds for

the ESRD patients covered by the ESCO will receive a share

of the cost savings. ESCOs that include dialysis chains with

more than 200 facilities are required to share in the risk of

cost increases and reimburse CMS a share of any such in-

creases. Applications must be approved by CMS to participate

in the program.

Changes in the law or the reimbursement method could

affect the scope of payments for services as well as for insur-

ance coverage and the product business. This could have a

significant adverse impact on the assets and liabilities, finan-

cial position, and results of operations.

Research and developmentThe development of new products and therapies always car-

ries the risk that the ultimate goal might not be achieved,

or might take longer than planned. Regulatory approval of

new products requires comprehensive, cost-intensive pre-

clinical and clinical studies. Furthermore, there is a risk that

regulatory authorities either do not grant, or delay, product

approval. In addition, adverse effects of our products that

may be discovered after regulatory approval or registration

may lead to a partial or complete withdrawal from the mar-

ket, due either to regulatory actions or our voluntary decision

to stop marketing a product. The Fresenius Group spreads

its risk widely by conducting development activities in various

product segments. We also counteract risks from research

and development projects by regularly analyzing and assess-

ing development trends and examining the progress of

research projects. We also strictly comply with the legal reg-

ulations for clinical and chemical-pharmaceutical research

and development. With IV drugs, it is also crucial that new

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products are continually brought to the market in a timely

manner. The product development process can be controlled

on the basis of detailed project roadmaps and a tight focus

on the achievement of specific milestones. If the defined tar-

gets are not achieved, countermeasures can be initiated.

Risks from the integration of acquisitionsThe acquisition and integration of companies carries risks

that can adversely affect the assets and liabilities, financial

position, and results of operations of Fresenius. Following an

acquisition, the acquired company’s structure must be inte-

grated while clarifying legal questions and contractual obliga-

tions. Marketing, patient services, and logistics must also

be unified. During the integration phase, key managers can

leave the company and both the course of ongoing business

processes and relationships with customers can be harmed.

In addition, change-of-control clauses may be claimed. The

integration process may prove to be more difficult and cost-

intensive, or last longer than expected. Risks can arise from

the operations of the newly acquired company that Fresenius

regarded as insignificant or was unaware of. An acquisition

may also prove to be less beneficial than initially expected.

Future acquisitions may be a strain on the finances and man-

agement of our business. Moreover, as a consequence of an

acquisition, Fresenius may become directly or indirectly liable

toward third parties, or claims against third parties may turn

out to be non-assertable.

We counter risks from acquisitions through detailed inte-

gration roadmaps and strict integration and project manage-

ment, so that countermeasures can be initiated in good time

if there are deviations from the expected development.

Personnel risksThe Company addresses potential shortages of qualified per-

sonnel externally by utilizing personnel marketing measures,

and internally by offering comprehensive personnel devel-

opment programs. We also seek to retain our employees by

introducing life-work time accounts in various areas. Further-

more, employees are entitled to attractive fringe benefits and,

in part, bonuses. By using target group-specific measures,

Fresenius addresses the overall shortage of specialized hospi-

tal personnel. We thereby recruit qualified, dedicated, and

specialized personnel, thus ensuring our high standard of treat-

ment quality. At the same time, by supporting the training

of young employees, we thereby seek their commitment to

Fresenius. As a result of these measures, risks in personnel

marketing are not considered to be significant.

Financial risksThe international operations of the Fresenius Group expose us

to a variety of currency risks. In addition, the financing of

the business exposes us to certain interest rate risks. We use

derivative financial instruments as part of our risk manage-

ment to avoid any possible negative impacts of these risks.

However, we limit ourselves to non-exchange-traded, mar-

ketable instruments, used exclusively to hedge our operations

and not for trading or speculative purposes. All transactions

are conducted with banks that have a high rating.

The Fresenius Group’s foreign exchange risk manage-

ment is based on a policy approved by the Management Board

that defines the targets, organization, and handling of the risk

management processes. In particular, the guidelines assign

responsibilities for risk determination, the execution of hedg-

ing transactions, and the regular reporting of risk manage-

ment. These responsibilities are coordinated with the manage-

ment structures in the residual business processes of the

Group. Decisions on the use of derivative financial instruments

in interest rate management are taken in close consultation

with the Management Board. Hedging transactions using

derivatives are carried out by the Corporate Treasury depart-

ment of the Fresenius Group – apart from a few exceptions

in order to adhere to foreign currency regulations. These trans-

actions are subject to stringent internal controls. This policy

ensures that the Management Board is fully informed of all

significant risks and current hedging activities.

The Fresenius Group is protected, to a large extent, against

currency and interest rate risks. As of December 31, 2014,

approximately 63% of the Fresenius Group’s debt was pro-

tected against increases in interest rates either by fixed-rate

financing arrangements or by interest rate hedges; 37%, or

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Management Report90

€ 5,718 million, was exposed to interest rate risks. A sensitivity

analysis shows that a rise of 0.5% in the reference rates

relevant for Fresenius would have a less than 1.5% impact on

Group net income.

As a global company, Fresenius is widely exposed to

trans lation effects due to foreign exchange rate fluctuations.

The exchange rate of the U.S. dollar to the euro is of partic-

ular importance because of our extensive operations in the

United States. Translation risks are not hedged. A sensitivity

analysis shows that a one cent change in the exchange rate

of the U.S. dollar to the euro would have an annualized effect

of about € 90 million on Group sales, about € 16 million on

EBIT, and about € 3 million on Group net income.

As a globally active company, we have production facilities

in all the main currency areas. In the service businesses,

our revenue and cost base largely coincide. The Fresenius

Group uses a Cash-Flow-at-Risk (CFaR) model in order to esti-

mate and quantify such transaction risks from foreign cur-

rencies. The foreign currency cash flows that are reasonably

expected to arise within the following twelve months, less

any hedges, form the basis for the analysis of the currency risk.

As of December 31, 2014, the Fresenius Group’s cash flow

at risk was € 50 million. Hence, with a probability of 95%, a

potential loss in relation to the forecasted foreign exchange

cash flows of the next twelve months will not be higher than

€ 50 million. Further details on financial risks can be found on

pages 161 to 167 in the Notes.

Financial risks that could arise from acquisitions, invest-

ments in property, plant and equipment, and in intangible

assets are assessed through careful and in-depth reviews of

the projects, sometimes assisted by external consultants.

Goodwill and other intangible assets with an indefinite useful

life carried in the Group’s consolidated balance sheet are

tested for impairment each year. Further information can be

found on pages 125 ff. of the Notes.

By normally assessing the creditworthiness of new custom-

ers, we limit the risk of late payment and defaults by cus-

tomers. We also conduct follow-up assessments and review

credit lines on an ongoing basis. Receivables outstanding

from existing customers are monitored, and the risk of defaults

is assessed. This particularly applies to countries with bud-

getary problems and countries exposed to political risks. In

2014, we again worked on our receivables, taking certain

measures such as factoring.

As a global corporation, Fresenius is subject to numerous

tax codes and regulations. The Fresenius Group’s compa-

nies are subject to regular tax audits. Any changes in tax reg-

ulations or resulting from tax audits could lead to higher

tax payments. Information on the status of the tax audits can

be found on pages 119 to 121 of the Notes.

Fresenius’ debt was € 15,454 million as of December 31,

2014. The debt could limit the ability to pay dividends,

arrange refinancing, be in compliance with its credit cove-

nants, or implement the corporate strategy. Other financing

risks could arise for Fresenius in the case of an ongoing

general financial market crisis. We reduce these risks through

a high proportion of mid- and long-term funding with a

balanced maturity profile. Our financing agreements contain

covenants requiring us to comply with certain financial

ratios and additional financial criteria. Non-compliance with

these covenants could result in a default and acceleration

of the debt under the agreements.

Additional information on conditions and maturities can

be found on pages 129 ff. of the Notes and on pages 69 ff. of

the Management Report.

Legal risksRisks that arise from legal disputes are continually identified,

analyzed, and communicated within the Company. Companies

in the health care industry are regularly exposed to actions

for breach of their duties of due care, product liability, breach

of warranty obligations, patent infringements, treatment errors,

and other claims. This can result in high claims for damages

and substantial costs for legal defense, regardless of whether

a claim for damages is actually justified. Legal disputes can

also result in an inability to insure against risks of this kind at

acceptable terms in future. Products from the health care

industry can also be subject to recall actions. This could have

a negative effect on the assets and liabilities, financial posi-

tion, and results of operations of the Group.

Information regarding legal matters and an ongoing inter-

nal compliance review at Fresenius Medical Care can be

found on pages 152 to 159 of the Notes.

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The Fresenius Group is also involved in various legal issues

resulting from business operations. Although it is not possible

to predict the outcome of these disputes, none is expected to

have a significant adverse impact on the assets and liabilities,

financial position, and results of operations of the Group.

Other risksOther risks, such as environmental risks and risks involving

management and control systems, or our IT systems, were

not considered to be significant. IT risks are countered

through security measures, controls, and monitoring. In addi-

tion, we counter these risks with constant investment in

hardware and software, as well as by improving our system

know-how. Potential risks are covered by a detailed contin-

gency plan, which is continuously improved and tested. Redun-

dant systems are maintained for all key systems, such as IT

systems or communications infrastructure. A password system

is in place to minimize organizational risks, such as manipu-

lation and unauthorized access. In addition, there are Com-

pany guidelines regulating the granting of access authoriza-

tion, and compliance with these rules is monitored. We also

conduct operational and security-related audits.

Risks with effect on the 1-year forecast periodThe chart beside shows the significant risks that could lead

to deviations from the expected business performance within

the 1-year forecast period.

Change of risk assessment compared to previous yearIn 2014, the Company’s risk assessment did not change

compared to the previous year. The chart beside continues

to be valid.

ASSESSMENT OF OVERALL RISK The basis for evaluating overall risk is the risk management

that is regularly audited by management. Potential risks for the

Group include factors beyond its control, such as the evolution

of economies, which are constantly monitored by Fresenius.

Risks also include factors immediately within its control, such

as operating risks, which the Company anticipates and reacts

to appropriately, as required. There are currently no recogniz-

able risks regarding future performance that appear to pre-

sent a long-term and material threat to the Group’s assets and

liabilities, financial position, and results of operations. We

have created organizational structures that provide all the con-

ditions needed to rapidly alert us to possible risk situations

and to be able to take suitable counteraction.

RISKS AFFECTING THE 1-YEAR FORECAST PERIOD

hig

h ▶ Currencies and interest rates

med

ium

▶ Regulatory environment

▶ Quality

▶ Reimbursement rates and prices

low

▶ Procurement

▶ Litigations

▶ Tax

low medium high

Potential impact

Pro

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Financial S

tatements

Consolidated Financial Statements92


93 Consolidated statement of comprehensive income

94 Consolidated statement of financial position


96 Consolidated statement of changes in equity


100 Notes

Table of CoNTeNTs CoNsolidaTed fiNaNCial sTaTemeNTs

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93Consolidated Financial Statements Consolidated statement of income / Consolidated statement of comprehensive income

FreSeniuS Se & Co. KGaa

ConSolidated Statement oF inCome


ConSolidated Statement oF ComprehenSive inCome

€ in millions Note 2014 2013

sales 4 23,231 20,331

Cost of sales 5 - 16,389 - 13,948

Gross profit 6,842 6,383

selling, general and administrative expenses 8 - 3,359 - 3,044

Research and development expenses - 369 - 348

operating income (eBit) 3,114 2,991

interest income 9 128 50

interest expenses 9 - 730 - 634

income before income taxes 2,512 2,407

income taxes 10 - 700 - 669

net income 1,812 1,738

less noncontrolling interest 11 745 727

net income attributable to shareholders of Fresenius Se & Co. KGaa 1,067 1,011

earnings per ordinary share in € (after stock split 1 : 3) 12 1.97 1.89

fully diluted earnings per ordinary share in € (after stock split 1 : 3) 12 1.96 1.87

The following notes are an integral part of the consolidated financial statements.

€ in millions Note 2014 2013

net income 1,812 1,738

other comprehensive income (loss)

foreign currency translation 27, 29 953 - 581

Cash flow hedges 27, 29 1 35

Change of fair value of available for sale financial assets 27, 29 - 23 41

actuarial gains / losses on defined benefit pension plans 24, 27 - 340 37

income taxes related to components of other comprehensive income (loss) 27 85 - 23

other comprehensive income (loss), net 676 - 491

total comprehensive income 2,488 1,247

Comprehensive income attributable to noncontrolling interest subject to put provisions 171 65

Comprehensive income attributable to noncontrolling interest not subject to put provisions 1,018 394

Comprehensive income attributable to shareholders of Fresenius Se & Co. KGaa 1,299 788


Financial S

tatements



ConSolidated Statement oF FinanCial poSition

as of december 31, € in millions Note 2014 2013

Cash and cash equivalents 13 1,175 864

Trade accounts receivable, less allowance for doubtful accounts 14 4,235 3,474

accounts receivable from and loans to related parties 36 28

inventories 15 2,333 2,014

other current assets 16 1,843 1,261

deferred taxes 10 406 331

i. total current assets 10,028 7,972

Property, plant and equipment 17 6,776 5,082

Goodwill 18 19,868 14,826

other intangible assets 18 1,446 1,241

other non-current assets 16 1,458 3,433


ii. total non-current assets 29,869 24,786

total assets 39,897 32,758

as of december 31, € in millions Note 2014 2013

Trade accounts payable 1,052 885

short-term accounts payable to related parties 5 2

short-term accrued expenses and other short-term liabilities 19, 20 4,164 3,057

short-term debt 21 230 959

short-term loans from related parties 3 6

Current portion of long-term debt and capital lease obligations 21 753 855

Current portion of senior Notes 22 682 0

short-term accruals for income taxes 161 211


a. total short-term liabilities 7,104 6,023

long-term debt and capital lease obligations, less current portion 21 5,977 5,871

senior Notes, less current portion 22 6,977 5,113

Convertible bonds 23 832 0

long-term accrued expenses and other long-term liabilities 19, 20 661 434

Pension liabilities 24 1,099 714

long-term accruals for income taxes 216 180


B. total long-term liabilities 16,629 13,003

i. total liabilities 23,733 19,026

ii. noncontrolling interest subject to put provisions 25 681 472

a. noncontrolling interest not subject to put provisions 25 6,148 5,065

subscribed capital 26 542 539

Capital reserve 26 3,018 2,955

other reserves 26 5,894 5,052

accumulated other comprehensive loss 27 - 119 - 351

B. total Fresenius Se & Co. KGaa shareholders’ equity 9,335 8,195

iii. total shareholders’ equity 15,483 13,260

total liabilities and shareholders’ equity 39,897 32,758


asseTs

liabiliTies aNd shaReholdeRs’ equiTy

Fin

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95Consolidated Financial Statements Consolidated statement of financial position / Consolidated statement of cash flows


ConSolidated Statement oF CaSh FlowS

January 1 to december 31, € in millions Note 2014 2013

operating activities

Net income 1,812 1,738

adjustments to reconcile net income to cash and cash equivalents provided by operating activities

depreciation and amortization 16, 17, 18 937 843

Gain on sale of investments and divestitures 2 - 66 - 55

Change in deferred taxes 10 60 2

Gain / loss on sale of fixed assets 7 - 14

Changes in assets and liabilities, net of amounts from businesses acquired or disposed of

Trade accounts receivable, net 14 - 204 18

inventories 15 - 134 - 268

other current and non-current assets 16 - 5 78

accounts receivable from / payable to related parties - 8 - 8

Trade accounts payable, accrued expenses and other short-term and long-term liabilities 19, 20 246 48

accruals for income taxes - 60 - 62

net cash provided by operating activities 2,585 2,320

investing activities

Purchase of property, plant and equipment 17 - 1,345 - 1,071

Proceeds from sales of property, plant and equipment 22 24

acquisitions and investments, net of cash acquired and net purchases of intangible assets 2, 31 - 2,214 - 2,703

Proceeds from sale of investments and divestitures 2 186 147

net cash used in investing activities - 3,351 - 3,603

Financing activities

Proceeds from short-term loans 21 202 1,088

Repayments of short-term loans 21 - 933 - 319

Proceeds from short-term loans from related parties – –

Repayments of short-term loans from related parties – –

Proceeds from long-term debt and capital lease obligations 21 2,541 3,810

Repayments of long-term debt and capital lease obligations 21 - 3,299 - 2,042

Proceeds from the issuance of senior Notes 22 2,094 500

Repayments of liabilities from senior Notes 22 0 - 1,150

Proceeds from the issuance of convertible bonds 23 900 0

Payments for the share buy-back program of fresenius medical Care 26 0 - 385

Changes of accounts receivable securitization program 21 - 7 142

Proceeds from the exercise of stock options 33 125 152

dividends paid - 582 - 491

Change in noncontrolling interest 25 – - 2

exchange rate effect due to corporate financing 2 2

net cash provided by financing activities 1,043 1,305

effect of exchange rate changes on cash and cash equivalents 34 - 43

net increase / decrease in cash and cash equivalents 311 - 21

Cash and cash equivalents at the beginning of the reporting period 13 864 885

Cash and cash equivalents at the end of the reporting period 13 1,175 864


Financial S

tatements



ConSolidated Statement oF ChanGeS in equity

subscribed Capital Reserves

Note

Number of ordinary shares

in thousand 1amount

€ in thousandsamount

€ in millions

Capital reserve

€ in millions

other reserves

€ in millions

as of december 31, 2012 534,564 534,564 535 2,868 4,358

Proceeds from the exercise of stock options 33 4,521 4,521 4 91

Compensation expense related to stock options 33 21

dividends paid 26 - 196

Purchase of noncontrolling interest not subject to put provisions 25

share buy-back program of fresenius medical Care aG & Co. KGaa 26 - 121

Change in fair value of noncontrolling interest subject to put provisions 25 - 25

Comprehensive income (loss)

Net income 1,011


Cash flow hedges 27, 29

Change of fair value of available for sale financial assets 27, 29

foreign currency translation 27, 29

actuarial gains / losses on defined benefit pension plans 24, 27

Comprehensive income (loss) 1,011

as of december 31, 2013 539,085 539,085 539 2,955 5,052

Proceeds from the exercise of stock options 33 2,448 2,448 3 67

Compensation expense related to stock options 33 19

dividends paid 26 - 225


Change in fair value of noncontrolling interest subject to put provisions 25 - 23


Net income 1,067


Cash flow hedges 27, 29

Change of fair value of available for sale financial assets 27, 29

foreign currency translation 27, 29

actuarial losses on defined benefit pension plans 24, 27

Comprehensive income 1,067

as of december 31, 2014 541,533 541,533 542 3,018 5,894

1 Prior year figures were adjusted due to the stock split in 2014.

Fin

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97Consolidated Financial Statements Consolidated statement of changes in equity

Note

accumulated other com-prehensive

income (loss) € in millions

Total fresenius se & Co. KGaa shareholders’

equity € in millions

Non controlling interest not

subject to put provisions

€ in millions

Total shareholders’

equity € in millions

as of december 31, 2012 - 128 7,633 5,125 12,758

Proceeds from the exercise of stock options 33 95 57 152

Compensation expense related to stock options 33 21 7 28

dividends paid 26 - 196 - 206 - 402

Purchase of noncontrolling interest not subject to put provisions 25 0 6 6

share buy-back program of fresenius medical Care aG & Co. KGaa 26 - 121 - 264 - 385

Change in fair value of noncontrolling interest subject to put provisions 25 - 25 - 54 - 79


Net income 1,011 645 1,656


Cash flow hedges 27, 29 15 15 12 27

Change of fair value of available for sale financial assets 27, 29 34 34 – 34

foreign currency translation 27, 29 - 267 - 267 - 286 - 553

actuarial gains / losses on defined benefit pension plans 24, 27 - 5 - 5 23 18

Comprehensive income (loss) - 223 788 394 1,182

as of december 31, 2013 - 351 8,195 5,065 13,260

Proceeds from the exercise of stock options 33 70 55 125

Compensation expense related to stock options 33 19 4 23

dividends paid 26 - 225 - 240 - 465

Purchase of noncontrolling interest not subject to put provisions 25 0 297 297

Change in fair value of noncontrolling interest subject to put provisions 25 - 23 - 51 - 74


Net income 1,067 635 1,702


Cash flow hedges 27, 29 - 2 - 2 2 –

Change of fair value of available for sale financial assets 27, 29 - 16 - 16 – - 16

foreign currency translation 27, 29 393 393 470 863

actuarial losses on defined benefit pension plans 24, 27 - 143 - 143 - 89 - 232

Comprehensive income 232 1,299 1,018 2,317

as of december 31, 2014 - 119 9,335 6,148 15,483


Financial S

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ConSolidated SeGment reportinG

fresenius medical Care fresenius Kabi fresenius helios fresenius Vamed Corporate / other fresenius Group

€ in millions 2014 2013 Change 2014 1 2013 1 Change 2014 2 2013 Change 2014 2013 Change 2014 4 2013 3 Change 2014 2013 Change

sales 11,917 11,000 8% 5,146 4,996 3% 5,244 3,393 55% 1,042 1,020 2% - 118 - 78 - 51% 23,231 20,331 14%

thereof contribution to consolidated sales 11,869 10,978 8% 5,104 4,956 3% 5,244 3,393 55% 1,009 987 2% 5 17 - 71% 23,231 20,331 14%

thereof intercompany sales 48 22 118% 42 40 5% 0 0 33 33 0% - 123 - 95 - 29% 0 0

contribution to consolidated sales 51% 54% 22% 24% 23% 17% 4% 5% 0% 0% 100% 100%

ebiTda 2,223 2,187 2% 1,084 1,143 - 5% 732 508 44% 71 65 9% - 59 - 69 14% 4,051 3,834 6%

depreciation and amortization 526 488 8% 211 217 - 3% 179 118 52% 12 10 20% 9 10 - 10% 937 843 11%

ebiT 1,697 1,699 0% 873 926 - 6% 553 390 42% 59 55 7% - 68 - 79 14% 3,114 2,991 4%

Net interest - 310 - 308 - 1% - 196 - 236 17% - 56 - 48 - 17% - 1 - 3 67% - 39 11 -- - 602 - 584 - 3%

income taxes - 440 - 446 1% - 189 - 178 - 6% - 86 - 60 - 43% - 16 - 14 - 14% 31 29 7% - 700 - 669 - 5%

Net income attributable to shareholders of fresenius se & Co. KGaa 786 836 - 6% 468 487 - 4% 400 275 45% 41 37 11% - 628 - 624 - 1% 1,067 1,011 6%

operating cash flow 1,401 1,532 - 9% 641 488 31% 558 258 116% - 9 31 - 129% - 6 11 - 155% 2,585 2,320 11%

Cash flow before acquisitions and dividends 709 984 - 28% 289 177 63% 295 91 -- - 18 20 - 190% - 13 1 -- 1,262 1,273 - 1%

Total assets 20,960 16,764 25% 9,655 8,598 12% 8,352 6,597 27% 891 726 23% 39 73 - 47% 39,897 32,758 22%

debt 7,851 6,103 29% 5,205 4,735 10% 1,394 3,538 - 61% 159 117 36% 845 - 1,689 150% 15,454 12,804 21%

Capital expenditure, gross 701 563 25% 361 317 14% 266 172 55% 10 11 - 9% 7 10 - 30% 1,345 1,073 25%

acquisitions, gross / investments 1,495 424 -- 118 131 - 10% 824 2,185 - 62% 12 16 - 25% 1 - 2 150% 2,450 2,754 - 11%

Research and development expenses 92 95 - 3% 276 250 10% – – -- 0 0 1 3 - 67% 369 348 6%

employees (per capita on balance sheet date) 105,917 95,637 11% 32,899 31,961 3% 68,852 42,913 60% 7,746 7,010 10% 861 816 6% 216,275 178,337 21%

Key figures

ebiTda margin 18.7% 19.9% 21.1% 22.9% 14.0% 15.0% 6.8% 6.4% 17.6% 2 19.1% 1

ebiT margin 14.2% 15.4% 17.0% 18.5% 10.5% 11.5% 5.7% 5.4% 13.6% 2 15.0% 1

depreciation and amortization in % of sales 4.4% 4.4% 4.1% 4.3% 3.4% 3.5% 1.2% 1.0% 4.0% 4.1%

operating cash flow in % of sales 11.8% 13.9% 12.5% 9.8% 10.6% 7.6% - 0.9% 3.0% 11.1% 11.4%

Rooa 9.7% 10.5% 10.5% 11.9% 7.4% 9.3% 11.2% 11.6% 9.1% 5 10.6% 6

1 before integration costs2 before integration costs and disposal gains (two helios hospitals)3 after integration costs4 after integration costs and disposal gains (two helios hospitals, Rhön stake)5 The underlying pro forma ebiT does not include integration costs and disposal gains

(two helios hospitals, Rhön stake).6 The underlying pro forma ebiT does not include integration costs.

The consolidated segment reporting by business segment is an integral part of the notes.The following notes are an integral part of the consolidated financial statements.

by busiNess seGmeNT

by ReGioNeurope North america asia-Pacific latin america africa fresenius Group

€ in millions 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change

sales 10,162 8,216 24% 9,307 8,620 8% 2,205 1,945 13% 1,186 1,174 1% 371 376 - 1% 23,231 20,331 14%


ebiT 865 823 5% 1,684 1,667 1% 392 296 32% 131 159 - 18% 42 46 - 9% 3,114 2,991 4%

depreciation and amortization 432 370 17% 398 377 6% 65 56 16% 36 35 3% 6 5 20% 937 843 11%

Total assets 15,701 13,529 16% 19,798 15,833 25% 2,960 2,305 28% 1,273 950 34% 165 141 17% 39,897 32,758 22%

Capital expenditure, gross 670 519 29% 451 372 21% 124 111 12% 92 62 48% 8 9 - 11% 1,345 1,073 25%

acquisitions, gross / investments 879 2,257 - 61% 1,233 347 -- 208 126 65% 130 21 -- 0 3 - 100% 2,450 2,754 - 11%

employees (per capita on balance sheet date) 112,829 85,706 32% 65,817 60,600 9% 19,690 15,859 24% 16,136 14,474 11% 1,803 1,698 6% 216,275 178,337 21%

The consolidated segment reporting by region is an integral part of the notes.The following notes are an integral part of the consolidated financial statements.

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99Consolidated Financial Statements Consolidated segment reporting

fresenius medical Care fresenius Kabi fresenius helios fresenius Vamed Corporate / other fresenius Group

€ in millions 2014 2013 Change 2014 1 2013 1 Change 2014 2 2013 Change 2014 2013 Change 2014 4 2013 3 Change 2014 2013 Change

sales 11,917 11,000 8% 5,146 4,996 3% 5,244 3,393 55% 1,042 1,020 2% - 118 - 78 - 51% 23,231 20,331 14%

thereof contribution to consolidated sales 11,869 10,978 8% 5,104 4,956 3% 5,244 3,393 55% 1,009 987 2% 5 17 - 71% 23,231 20,331 14%

thereof intercompany sales 48 22 118% 42 40 5% 0 0 33 33 0% - 123 - 95 - 29% 0 0


ebiTda 2,223 2,187 2% 1,084 1,143 - 5% 732 508 44% 71 65 9% - 59 - 69 14% 4,051 3,834 6%

depreciation and amortization 526 488 8% 211 217 - 3% 179 118 52% 12 10 20% 9 10 - 10% 937 843 11%

ebiT 1,697 1,699 0% 873 926 - 6% 553 390 42% 59 55 7% - 68 - 79 14% 3,114 2,991 4%

Net interest - 310 - 308 - 1% - 196 - 236 17% - 56 - 48 - 17% - 1 - 3 67% - 39 11 -- - 602 - 584 - 3%

income taxes - 440 - 446 1% - 189 - 178 - 6% - 86 - 60 - 43% - 16 - 14 - 14% 31 29 7% - 700 - 669 - 5%

Net income attributable to shareholders of fresenius se & Co. KGaa 786 836 - 6% 468 487 - 4% 400 275 45% 41 37 11% - 628 - 624 - 1% 1,067 1,011 6%

operating cash flow 1,401 1,532 - 9% 641 488 31% 558 258 116% - 9 31 - 129% - 6 11 - 155% 2,585 2,320 11%

Cash flow before acquisitions and dividends 709 984 - 28% 289 177 63% 295 91 -- - 18 20 - 190% - 13 1 -- 1,262 1,273 - 1%

Total assets 20,960 16,764 25% 9,655 8,598 12% 8,352 6,597 27% 891 726 23% 39 73 - 47% 39,897 32,758 22%

debt 7,851 6,103 29% 5,205 4,735 10% 1,394 3,538 - 61% 159 117 36% 845 - 1,689 150% 15,454 12,804 21%

Capital expenditure, gross 701 563 25% 361 317 14% 266 172 55% 10 11 - 9% 7 10 - 30% 1,345 1,073 25%

acquisitions, gross / investments 1,495 424 -- 118 131 - 10% 824 2,185 - 62% 12 16 - 25% 1 - 2 150% 2,450 2,754 - 11%

Research and development expenses 92 95 - 3% 276 250 10% – – -- 0 0 1 3 - 67% 369 348 6%

employees (per capita on balance sheet date) 105,917 95,637 11% 32,899 31,961 3% 68,852 42,913 60% 7,746 7,010 10% 861 816 6% 216,275 178,337 21%

Key figures

ebiTda margin 18.7% 19.9% 21.1% 22.9% 14.0% 15.0% 6.8% 6.4% 17.6% 2 19.1% 1

ebiT margin 14.2% 15.4% 17.0% 18.5% 10.5% 11.5% 5.7% 5.4% 13.6% 2 15.0% 1

depreciation and amortization in % of sales 4.4% 4.4% 4.1% 4.3% 3.4% 3.5% 1.2% 1.0% 4.0% 4.1%

operating cash flow in % of sales 11.8% 13.9% 12.5% 9.8% 10.6% 7.6% - 0.9% 3.0% 11.1% 11.4%

Rooa 9.7% 10.5% 10.5% 11.9% 7.4% 9.3% 11.2% 11.6% 9.1% 5 10.6% 6

1 before integration costs2 before integration costs and disposal gains (two helios hospitals)3 after integration costs4 after integration costs and disposal gains (two helios hospitals, Rhön stake)5 The underlying pro forma ebiT does not include integration costs and disposal gains

(two helios hospitals, Rhön stake).6 The underlying pro forma ebiT does not include integration costs.

The consolidated segment reporting by business segment is an integral part of the notes.The following notes are an integral part of the consolidated financial statements.

europe North america asia-Pacific latin america africa fresenius Group

€ in millions 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change 2014 2013 Change

sales 10,162 8,216 24% 9,307 8,620 8% 2,205 1,945 13% 1,186 1,174 1% 371 376 - 1% 23,231 20,331 14%


ebiT 865 823 5% 1,684 1,667 1% 392 296 32% 131 159 - 18% 42 46 - 9% 3,114 2,991 4%

depreciation and amortization 432 370 17% 398 377 6% 65 56 16% 36 35 3% 6 5 20% 937 843 11%

Total assets 15,701 13,529 16% 19,798 15,833 25% 2,960 2,305 28% 1,273 950 34% 165 141 17% 39,897 32,758 22%

Capital expenditure, gross 670 519 29% 451 372 21% 124 111 12% 92 62 48% 8 9 - 11% 1,345 1,073 25%

acquisitions, gross / investments 879 2,257 - 61% 1,233 347 -- 208 126 65% 130 21 -- 0 3 - 100% 2,450 2,754 - 11%

employees (per capita on balance sheet date) 112,829 85,706 32% 65,817 60,600 9% 19,690 15,859 24% 16,136 14,474 11% 1,803 1,698 6% 216,275 178,337 21%

The consolidated segment reporting by region is an integral part of the notes.The following notes are an integral part of the consolidated financial statements.


Financial S

tatements

101 General notes

101 1. Principles

101 I. Group structure

101 II. Basis of presentation

102 III. Summary of significant accounting policies

113 IV. Critical accounting policies

114 2. Acquisitions, divestitures and investments

118 Notes on the consolidated statement of income

118 3. Special items

118 4. Sales

118 5. Cost of sales

118 6. Cost of materials

118 7. Personnel expenses

119 8. Selling, general and administrative expenses

119 9. Net interest

119 10. Taxes

121 11. Noncontrolling interest

121 12. Earnings per share

122 Notes on the consolidated statement of financial position

122 13. Cash and cash equivalents

122 14. Trade accounts receivable

122 15. Inventories

123 16. Other current and non-current assets

124 17. Property, plant and equipment

125 18. Goodwill and other intangible assets

128 19. Accrued expenses

129 20. Other liabilities

130 21. Debt and capital lease obligations

137 22. Senior Notes

138 23. Convertible bonds

139 24. Pensions and similar obligations

145 25. Noncontrolling interest

146 26. Fresenius SE & Co. KGaA shareholders’ equity

150 27. Other comprehensive income (loss)

152 Other notes

152 28. Commitments and contingent liabilities

160 29. Financial instruments

167 30. Supplementary information on capital management

168 31. Supplementary information on the consolidated

statement of cash flows

169 32. Notes on the consolidated segment reporting

171 33. Stock options

179 34. Related party transactions

179 35. Subsequent events

180 Notes in accordance with the German Commercial Code (HGB)

180 36. Compensation of the Management Board and

the Supervisory Board

181 37. Auditor’s fees

181 38. Corporate Governance

181 39. Proposal for the distribution of earnings

182 40. Responsibility statement

TABlE OF CONTENTS NOTES

Consolidated Financial Statements General notes 101

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General noteS

1. PrinCiPleS

i. GrouP StruCture

Fresenius is a global health care group with products and ser-

vices for dialysis, hospitals and outpatient medical care. In

addition, the Fresenius Group focuses on hospi tal operations

and also manages projects and provides services for hospi-

tals and other health care facilities worldwide. Besides the

activities of the parent company Fresenius SE & Co. KGaA,

Bad Homburg v. d. H., the operating activities were split into

the following legally independent business segments in the

fiscal year 2014:

▶ Fresenius Medical Care

▶ Fresenius Kabi

▶ Fresenius Helios

▶ Fresenius Vamed

Fresenius Medical Care is the world’s leading provider of ser-

vices and products for patients with chronic kidney failure.

As of December 31, 2014, Fresenius Medical Care was treat-

ing 286,312 patients in 3,361 dialysis clinics.

Fresenius Kabi offers infusion therapies, intravenously

administered generic drugs and clinical nutrition for seriously

and chronically ill patients in the hospital and outpatient

environments. The company is also a leading supplier of medi-

cal devices and transfusion technology products.

Fresenius Helios is Germany’s largest hospital operator.

At the end of 2014, the HElIOS Group operated 110 hospitals:

86 acute care hospitals, including 7 maximum care clinics

in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, Wies-

baden and Wuppertal as well as 24 post-acute care hospitals.

Fresenius Helios has more than 34,000 beds and treats over

4.2 million patients – including more than 1.2 million inpa-

tients – each year.

Fresenius Vamed manages projects and provides services

for hospitals and other health care facilities worldwide.

Fresenius SE & Co. KGaA owned 31.09% of the subscribed

capital of Fresenius Medical Care AG & Co. KGaA (FMC-AG &

Co. KGaA) at the end of the fiscal year 2014. Fresenius Medical

Care Management AG, the general partner of FMC-AG & Co.

KGaA, is a wholly owned subsidiary of Fresenius SE & Co. KGaA.

Through this structure, Fresenius SE & Co. KGaA has rights

that give Fresenius SE & Co. KGaA the ability to direct the rele-

vant activities and, hence, the earnings of FMC-AG & Co.

KGaA. Therefore, FMC-AG & Co. KGaA is fully consolidated in

the consolidated financial statements of the Fresenius Group.

Fresenius SE & Co. KGaA continued to hold 100% of the

management companies of the business segments Fresenius

Kabi ( Fresenius Kabi AG) as well as Fresenius Helios and

Fresenius Vamed (both held through Fresenius ProServe

GmbH) on December 31, 2014. Through Fresenius ProServe

GmbH, Fresenius SE & Co. KGaA holds 100% in HElIOS

Kliniken GmbH and a 77% stake in VAMED AG. In addition,

Fresenius SE & Co. KGaA holds interests in com panies with

holding functions regarding real estate, financing and insur-

ance, as well as in Fresenius Netcare GmbH which offers

services in the field of information technology.

The reporting currency in the Fresenius Group is the

euro. In order to make the presentation clearer, amounts are

mostly shown in million euros. Amounts under € 1 million

after rounding are marked with “–”.

ii. BaSiS oF PreSentation

The accompanying consolidated financial statements have

been prepared in accordance with the United States Generally

Accepted Accounting Principles (U.S. GAAP).

Fresenius SE & Co. KGaA, as a stock exchange listed com-

pany with a domicile in a member state of the European

Union, fulfills the obligation to prepare and publish the consol-

idated financial statements in accordance with the Interna-

tional Financial Reporting Standards (IFRS) applying Section

315a of the German Commercial Code (HGB). Simultaneously,

the Fresenius Group voluntarily prepares and publishes

the consolidated financial statements in accordance with

U.S. GAAP.

In order to improve readability, various items are aggre-

gated in the consolidated statement of financial position and

in the consolidated statement of income. These items are

shown separately in the notes to provide useful information

to the readers of the consolidated financial statements.


Financial S

tatements

The consolidated statement of financial position is classified on

the basis of the maturity of assets and liabilities; the con-

solidated statement of income is classified using the cost-of-

sales accounting format.

iii. Summary oF SiGniFiCant aCCountinG

PoliCieS

a) Principles of consolidationThe financial statements of consolidated entities have been

prepared using uniform accounting methods. The acquisi-

tions of companies are accounted for applying the purchase

method.

Capital consolidation is performed by offsetting invest-

ments in subsidiaries against the underlying revaluated equity

at the date of acquisition. The identifiable assets and liabili-

ties of subsidiaries as well as the noncontrolling interest are

recognized at their fair values. Any remaining debit balance

between the investments in subsidiaries plus the noncontrol-

ling interest and the revaluated equity is recognized as good-

will and is tested at least once a year for impairment.

All significant intercompany sales, expenses, income,

receivables and payables are eliminated. Profits and losses on

items of property, plant and equipment and inventory acquired

from other Group entities are also eliminated. Deferred tax

assets and liabilities are recognized on temporary differences

resulting from consolidation procedures.

Noncontrolling interest subject to put provisions is recog-

nized between liabilities and equity in the consolidated state-

ment of financial position. Noncontrolling interest not subject

to put provisions is comprised of the interest of non controlling

shareholders in the consolidated equity of Group entities.

Profits and losses attributable to the non controlling sharehold-

ers are separately disclosed in the consolidated statement of

income. Noncontrolling interest not subject to put provisions

of acquired entities is valuated at fair value.

Associated companies, over which Fresenius SE & Co.

KGaA has significant exercisable influence (generally it holds

more than 20% and less than 50% of the voting rights),

are con solidated using the equity method. Investments that

are not classified as in associated companies are recorded

at acqui sition costs or at fair value, respectively.

b) Composition of the GroupThe consolidated financial statements include all material

companies in which Fresenius SE & Co. KGaA has legal or

effective control. This includes variable interest entities

(VIEs) for which the Fresenius Group is deemed the primary

beneficiary.

Fresenius Medical Care has entered into various arrange-

ments with certain legal entities whereby the entities’ investors

own disproportionate equity ownership interests in relation

to the risks and rewards they retain for these arrangements or

the entities are unable to provide their own funding for their

operations. In these arrangements, the entities are VIEs, in

which Fresenius Medical Care has been determined to be the

primary beneficiary and which therefore have been fully con-

solidated. Fresenius Medical Care has provided some or all of

the following services to these VIEs: management, financing

or product supply. They generated approximately € 402 million

(US$ 534 million) and € 153 million (US$ 203 million) in sales

in 2014 and 2013, respectively. Fresenius Medical Care pro-

vided funding to these VIEs through loans and accounts

receivable of € 246 million (US$ 299 million) and € 109 million

(US$ 150 million) in 2014 and 2013, respectively. Relating to

the VIEs, in 2014, Fresenius Medical Care consolidated assets

in an amount of € 432 million (US$ 525 million), liabilities in

an amount of € 423 million (US$ 514 million) and € 9 million

(US$ 11 million) in equity. In 2013, € 160 million (US$ 221 mil-

lion) assets, € 107 million (US$ 147 million) liabilities and

€ 54 million (US$ 74 million) equity were consolidated. The

interest held by the other shareholders in the consolidated

VIEs is reported as noncontrolling interest in the consolidated

statement of financial position.

Fresenius Vamed participates in project entities which

are set up for long-term defined periods of time and for the

specific purpose of constructing and operating thermal cen-

ters. Some of these project entities qualify as VIEs, in which

Fresenius Vamed is not the primary beneficiary based on

the cash flow analysis of the involved parties. The project enti-

ties generated approximately € 98 million in sales in 2014

(2013: € 88 million). The VIEs finance themselves mainly

through debt, profit participation rights and investment grants.

Assets and liabilities relating to the VIEs are not material.


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Fresenius Vamed made no payments to the VIEs other than

contractually stipulated. From today’s perspective and due to

the contractual situation, Fresenius Vamed is not exposed to

any material risk of loss from these VIEs.

The consolidated financial statements of 2014 included,

in addition to Fresenius SE & Co. KGaA, 2,168 fully consolidated

companies and 29 companies were accounted for under the

equity method. In 2014, there were no material changes in the

scope of consolidated entities, except for those mentioned

in note 2, Acquisitions, divestitures and investments.

The complete list of the investments of Fresenius SE & Co.

KGaA, registered office in 61352 Bad Homburg v. d. H., Else-

Kröner-Straße 1, will be submitted to the electronic Federal

Gazette and the electronic companies register.

In 2014, the following fully consolidated German subsid-

iaries of the Fresenius Group applied the exemption provided

in Sections 264 (3) and 264b, respectively, of the German

Commercial Code (HGB):

Name of the company Registered office

Corporate / other

Fresenius Biotech Beteiligungs GmbH Bad Homburg v. d. H.

Fresenius Immobilien-Verwaltungs-GmbH & Co. Objekt Friedberg KG Bad Homburg v. d. H.

Fresenius Immobilien-Verwaltungs-GmbH & Co. Objekt St. Wendel KG Bad Homburg v. d. H.

Fresenius Immobilien-Verwaltungs-GmbH & Co. Objekt Schweinfurt KG Bad Homburg v. d. H.

Fresenius Netcare GmbH Bad Homburg v. d. H.

Fresenius ProServe GmbH Bad Homburg v. d. H.

FPS Beteiligungs AG Düsseldorf

FPS Immobilien VerwaltungsGmbH & Co. Reichenbach KG Bad Homburg v. d. H.

ProServe Krankenhaus Beteiligungs-gesellschaft mbH & Co. KG München

Fresenius Kabi

CFl GmbH Frankfurt am Main

Fresenius Kabi AG Bad Homburg v. d. H.

Fresenius Kabi Deutschland GmbH Bad Homburg v. d. H.

Hosped GmbH Friedberg

Rheinische Compounding GmbH Bonn

V. Krütten MedizinischeEinmalgeräte GmbH Idstein

Name of the company Registered office

Fresenius Helios

Betriebsführungsgesellschaft Schloß Schönhagen GmbH Schönhagen

Damp Diagnostik und Physio Holding GmbH Hamburg

ENDO Reha-Zentrum GmbH Hamburg

Gesundheitszentrum Buch GmbH Berlin

HElIOS Agnes-Karll-Krankenhaus GmbH Bad Schwartau

HElIOS Care GmbH Berlin

HElIOS Fachklinik Schleswig GmbH Schleswig

HElIOS Fachpflege Schleswig GmbH Schleswig

HElIOS Gesundheitsmanagement GmbH Berlin

HElIOS Kids in Pflege GmbH Geesthacht

HElIOS Klinik Ahrenshoop GmbH Ahrenshoop

HElIOS Klinik Berching GmbH Berching

HElIOS Klinik Blankenhain GmbH Blankenhain

HElIOS Klinik Bleicherode GmbH Bleicherode

HElIOS Klinik Geesthacht GmbH Geesthacht

HElIOS Klinik leisnig GmbH leisnig

HElIOS Klinik lengerich GmbH lengerich

HElIOS Klinik Schkeuditz GmbH Schkeuditz

HElIOS Klinik Schloss Schönhagen GmbH Damp

HElIOS Klinik Volkach GmbH Volkach

HElIOS Kliniken GmbH Berlin

HElIOS Kliniken Breisgau-Hochschwarzwald GmbH Müllheim

HElIOS Kliniken Mansfeld-Südharz GmbH Sangerhausen

HElIOS Kliniken Taunus GmbH Bad Schwalbach

HElIOS Klinikum Aue GmbH Aue

HElIOS Klinikum Bad Saarow GmbH Bad Saarow

HElIOS Klinikum Berlin-Buch GmbH Berlin

HElIOS Klinikum Erfurt GmbH Erfurt

HElIOS Klinikum Schwelm GmbH Schwelm

HElIOS Klinikum Wuppertal GmbH Wuppertal

HElIOS Privatkliniken GmbH Bad Homburg v. d. H.

HElIOS Rehaklinik Damp GmbH Damp

HElIOS-SERVICE GmbH Berlin

HElIOS Spital Überlingen GmbH Überlingen

HElIOS St. Josefs-Hospital GmbH Bochum

HElIOS Versorgungszentren GmbH Berlin

HElIOS Vogtland-Klinikum Plauen GmbH Plauen

HUMAINE Kliniken GmbH Berlin

Medizinisches Versorgungszentrum am HElIOS Klinikum Bad Saarow GmbH Bad Saarow

ostsee resort damp GmbH Damp

Reha-Zentrum Norderstedt GmbH Norderstedt

Senioren- und Pflegeheim Erfurt GmbH Erfurt

Verwaltungsgesellschaft ENDO-Klinik mbH Hamburg

WAK Wittgensteiner Akutkliniken “Bad Berleburg” GmbH Bad Berleburg


Financial S

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c) ClassificationsCertain items in the consolidated financial statements of

2013 have been reclassified to conform with the presentation

in 2014.

d) Sales recognition policySales from services are recognized at the amount estimated

to be receivable under reimbursement arrangements with

third party payors. Sales are recognized on the date services

and related products are provided and the customer is obli-

gated to pay.

Product sales are recognized when the title to the product

passes to the customers, either at the time of shipment,

upon receipt by the customer or upon any other terms that

clearly define passage of title. As product returns are not

typical, no return provisions are recognized. In the event that

a return is required, the appropriate reductions to sales,

cost of sales and accounts receivable are made. Sales are pre-

sented net of discounts, allowances and rebates.

In the business segment Fresenius Vamed, sales for long-

term production contracts are recognized using the percent-

age of completion (PoC) method when the accounting condi-

tions are met. The sales to be recognized are calculated as a

percentage of the costs already incurred based on the esti-

mated total cost of the contract, milestones laid down in the

contract or the percentage of completion. Profits are only rec-

ognized when the earnings of a production contract accounted

for using the PoC method can be measured reliably. Any

expected excess of total contract costs over total contract rev-

enue for a contract is recognized as an expense immediately.

Any tax assessed by a governmental authority that is

incurred as a result of a sales transaction (e. g. sales tax) is

excluded from sales and the related sale is reported on a

net basis.

e) Government grantsThe Fresenius Group primarily receives governmental funding

for hospitals in Germany to finance buildings and medical

equipment. Public sector grants are not recognized until there

is reasonable assurance that the respective conditions are

met and the grants will be received. Initially, the grant is

recorded as a liability and as soon as the asset is acquired,

the grant is offset against the acquisition costs. Expense-

related grants are recognized as income in the periods in

which related costs occur.

f) research and development expensesResearch is the independent and planned investigation under-

taken with the prospect of gaining new scientific or techni-

cal knowledge and understanding. Development is the techni-

cal and commercial implementation of research results and

occurs before the start of the commercial production or use.

Research and development expenses are expensed as incurred.

g) impairmentThe Fresenius Group reviews the carrying amounts of its prop-

erty, plant and equipment, intangible assets and other non-

current assets for impairment whenever events or changes in

circumstances indicate that the carrying amount of these

assets may not be recoverable. Recoverability of these assets

is measured by comparing the carrying amount of an asset

to the future net cash flow directly associated with the asset.

If assets are considered to be impaired, the impairment rec-

ognized is the amount by which the carrying amount exceeds

the fair value of the asset. The Fresenius Group uses a dis-

counted cash flow approach or other methods, if appropriate,

to assess fair value. long-lived assets to be disposed of by

sale are reported at the lower of carrying amount or fair value

less cost to sell and depreciation is ceased.

h) Capitalized interestThe Fresenius Group includes capitalized interest as part of

the cost of the asset if it is directly attributable to the acqui-

sition, construction or manufacture of qualifying assets. For

the fiscal years 2014 and 2013, interest of € 3 million and

€ 5 million, based on an average interest rate of 5.09% and

5.92%, respectively, was recognized as a component of the

cost of assets.


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i) income taxesCurrent taxes are calculated based on the earnings of the

fiscal year and in accordance with local tax rules of the

respective tax jurisdictions. Expected and executed addi-

tional tax payments and tax refunds for prior years are

also taken into account.

Deferred tax assets and liabilities are recognized for the

future consequences attributable to temporary differences

between the financial statement carrying amounts of existing

assets and liabilities and their respective tax basis. Further-

more, deferred taxes are recognized on certain consolidation

procedures affecting net income attributable to shareholders

of Fresenius SE & Co. KGaA. Deferred tax assets also include

claims to future tax reductions which arise from the more

likely than not expected usage of existing tax losses available

for carryforward. The recognition of deferred tax assets

from net operating losses and their utilization is based on the

budget planning of the Fresenius Group and implemented

tax strategies.

Deferred taxes are computed using enacted or adopted tax

rates in the relevant national jurisdictions when the amounts

are recovered. Tax rates which will be valid in the future but

are not adopted till the date of the statement of financial posi-

tion are not considered.

The realizability of the carrying amount of a deferred tax

asset is reviewed at each date of the statement of financial

position. In assessing the realizability of deferred tax assets,

the Management considers whether it is more likely than

not that some portion or all of a deferred tax asset will be real-

ized. The ultimate realization of deferred tax assets is depen-

dent upon the gen eration of future taxable income during the

periods in which those temporary differences and tax loss

carryforwards become deductible. The Management considers

the expected reversal of deferred tax lia bilities and projected

future taxable income in making this assessment.

If it is no longer more likely than not that sufficient taxable

income will be available to allow the benefit of part or of the

entire deferred tax asset to be utilized, the carrying amount of

the deferred tax asset is reduced to that certain extent. The

reduction is reversed to the date and extent that it becomes

probable that sufficient taxable profit will be available.

It is Fresenius Group’s policy that assets on uncertain tax

positions are recognized to the extent it is more likely than not

the tax will be recovered. It is also Fresenius Group’s policy

to recognize interest and penalties related to its tax positions

as income tax expense.

j) unrecognized tax benefitsThe recognition and measurement of all tax positions taken

or expected to be taken on a tax return requires a two step

approach. The Fresenius Group must determine whether it is

more likely than not that a tax position will be sustained

upon examination, including resolution of any related appeals

or litigation processes, based on the technical merits of the

position. If the threshold is met, the tax position is measured

at the largest amount of tax benefit that is more than 50%

likely of being realized upon settlement and is recognized in

the consolidated financial statements.

k) earnings per ordinary shareBasic earnings per ordinary share are computed by dividing

net income attributable to shareholders of Fresenius SE & Co.

KGaA by the weighted-average number of ordinary shares

outstanding during the year. Diluted earnings per share include

the effect of all potentially dilutive instruments on ordi nary

shares that would have been outstanding during the fiscal year.

The equity-settled awards granted under Fresenius’ and

Fresenius Medical Care’s stock option plans can result in a

dilutive effect.

l) Cash and cash equivalentsCash and cash equivalents are comprised of cash funds and

all short-term, liquid investments with original maturities of up

to three months (time deposits and securities).

m) trade accounts receivableTrade accounts receivable are stated at their nominal value

less an allowance for doubtful accounts. The allowances are

estimates comprised of customer-specific evaluations regard-

ing their payment history, current financial stability, and


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applicable country-specific risks for receivables that are over-

due more than one year. From time to time, accounts receiv-

able are reviewed for changes from the historic collection expe-

rience to ensure the appropriateness of the allowances.

n) inventoriesInventories are comprised of all assets which are held for sale

in the normal course of business (finished goods), in the pro-

cess of production for such sale (work in process) or consumed

in the production process or in the rendering of services (raw

materials and purchased components).

Inventories are stated at the lower of acquisition and

manufacturing cost (determined by using the average or first-

in, first-out method) or market value. Manufacturing costs

are comprised of direct costs, production and material over-

head, including depreciation charges.

o) available for sale financial assetsInvestments in equity instruments, debt instruments and

fund shares are classified as available for sale financial assets

and measured at fair value. The Fresenius Group regularly

reviews if objective substantial evidence occurs that would

indicate an impairment of a financial asset or a portfolio of

financial assets. After testing the recover ability of these assets,

a possible impairment loss is recorded in the consolidated

statement of financial position. Gains and losses of available

for sale financial assets are recognized directly in the con-

solidated statement of equity until the financial asset is dis-

posed of or if it is considered to be impaired. In the case of

an impairment, the accumulated net loss is retrieved from the

consolidated statement of equity and recognized in the con-

solidated statement of income.

p) Property, plant and equipmentProperty, plant and equipment are stated at acquisition and

manufacturing cost less accumulated depreciation. Signifi-

cant improvements are capitalized; repairs and maintenance

costs that do not extend the useful lives of the assets are

charged to expense as incurred. Depreciation on property,

plant and equipment is calculated using the straight-line

method over the estimated useful lives of the assets ranging

from 3 to 50 years for buildings and improvements (with

a weighted-average life of 16 years) and 2 to 15 years for

machinery and equipment (with a weighted-average life of

11 years).

q) intangible assets with finite useful livesIntangible assets with finite useful lives, such as patents, prod-

uct and distribution rights, non-compete agreements, tech-

nology as well as licenses to manufacture, distribute and sell

pharmaceutical drugs, are amortized using the straight-line

method over their respective useful lives to their residual val-

ues and reviewed for impairment (see note 1. III. g, Impair-

ment). The useful life of patents, product and distribution rights

ranges from 5 to 20 years, the average useful life is 13 years.

Non-compete agreements with finite useful lives have useful

lives ranging from 2 to 25 years with an average useful life

of 8 years. The useful life of management contracts with finite

useful lives ranges from 5 to 40 years. Technology has a

finite useful live of 15 years. licenses to manufacture, distrib-

ute and sell pharmaceutical drugs are amortized over the

contractual license period based upon the annual estimated

units of sale of the licensed product. All other intangible

assets are amortized over their individual estimated useful

lives between 3 and 15 years.

losses in value of a lasting nature are recorded as an

impairment.

r) Goodwill and other intangible assets with indefinite useful livesThe Fresenius Group identified intangible assets with indefi-

nite useful lives because, based on an analysis of all of the

relevant factors, there is no foreseeable limit to the period over

which those assets are expected to generate net cash inflows

for the Group. The identified intangible assets with indefinite

useful lives such as trade names and certain qualified man-

agement contracts acquired in a purchase method business


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combination are recognized and reported apart from goodwill.

They are recorded at acquisition costs. Goodwill and intan-

gible assets with indefinite useful lives are not amortized but

tested for impairment annually or when an event becomes

known that could trigger an impairment (impairment test).

To perform the annual impairment test of goodwill, the

Fresenius Group identified several reporting units and deter-

mined their carrying amount by assigning the assets and lia-

bilities, including the existing goodwill and intangible assets,

to those reporting units. A reporting unit is usually defined

one level below the segment level based on regions or legal

entities. 4 reporting units were identified in the segments

Fresenius Medical Care and Fresenius Kabi, respectively

(Europe, latin America, Asia-Pacific and North America). Ac-

cording to the regional organizational structure, the segment

Fresenius Helios consists of 11 reporting units, which are

managed by a central division. The segment Fresenius Vamed

consists of 2 reporting units (Project business and Service

business). At least once a year, the Fresenius Group compares

the fair value of each reporting unit to the reporting unit’s

carrying amount. The fair value of a reporting unit is deter-

mined using a discounted cash flow approach based upon the

cash flow expected to be generated by the reporting unit.

In case that the fair value of the reporting unit is less than its

carrying amount, the difference is at first recorded as an

impairment of the fair value of the goodwill.

To evaluate the recoverability of separable intangible assets

with indefinite useful lives, the Fresenius Group compares

the fair values of these intangible assets with their car rying

amounts. An intangible asset’s fair value is determined using

a discounted cash flow approach and other methods, if appro-

priate.

The recoverability of goodwill and other separable intan-

gible assets with indefinite useful lives recorded in the Group’s

consolidated statement of financial position was verified. As

a result, the Fresenius Group did not record any impairment

losses in 2014 and 2013.

Any excess of the net fair value of identifiable assets and

liabilities over cost (badwill) still existing after reassessing

the purchase price allocation is recognized immediately in

profit or loss.

s) leasesleased assets assigned to the Fresenius Group based on

the risk and rewards approach (finance leases) are recognized

as property, plant and equipment and measured on receipt

date at the present values of lease payments as long as their

fair values are not lower. leased assets are depreciated in

straight-line over their useful lives. If there is doubt as to

whether title to the asset passes at a later stage and there is

no opportune purchase option, the asset is depreciated over

the lease term if this is shorter. An impairment loss is recog-

nized if the recoverable amount is lower than the amortized

cost of the leased asset.

Finance lease liabilities are measured at the present value

of the future lease payments and are recognized as a finan-

cial liability.

Property, plant and equipment that is rented by the

Fresenius Group is accounted for at its purchase cost. Depre-

ciation is calculated using the straight-line method over

the leasing time and its expected residual value.

t) Financial instrumentsA financial instrument is any contract that gives rise to a

financial asset of one entity and a financial liability or equity

instrument of another entity.

Purchases and sales of financial assets are accounted for

on the trading day. The Fresenius Group does not make use

of the fair value option, which allows financial assets or finan-

cial liabilities to be classified as at fair value through profit

or loss upon initial recognition.

The following categories (according to International

Accounting Standard 39, Financial Instruments: Recognition

and Measurement) are relevant for the Fresenius Group:

loans and receivables, financial liabilities measured at amor-

tized cost, available for sale financial assets as well as finan-

cial liabilities / assets measured at fair value in the consolidated


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statement of income. Other categories are immaterial or not

existing in the Fresenius Group. No financial instruments were

reclassified during the fiscal year 2014.

According to their character, the Fresenius Group classifies

its financial instruments into the following classes: cash and

cash equivalents, assets recognized at carrying amount, liabil-

ities recognized at carrying amount, derivatives for hedging

purposes as well as assets recognized at fair value, liabilities

recognized at fair value and noncontrolling interest subject

to put provisions recognized at fair value.

The relationship between classes and categories as well

as the reconciliation to the consolidated statement of finan-

cial position is shown in tabular form in note 29, Financial

instruments.

The Fresenius Group has potential obligations to purchase

the noncontrolling interests held by third parties in certain

of its consolidated subsidiaries. These obligations are in the

form of put provisions and are exercisable at the third-party

owners’ discretion within specified periods as outlined in each

specific put provision. If these put provisions were exercised,

the Fresenius Group would be required to purchase all or

part of the third-party owners’ noncontrolling interests at the

appraised fair value at the time of exercise. To estimate the

fair values of the noncontrolling interest subject to put provi-

sions, the Fresenius Group recognizes the higher of net book

value or a multiple of earnings, based on historical earnings,

the development stage of the underlying business and other

factors. Depending on the market conditions, the estimated

fair values of the noncontrolling interest subject to these put

provisions can also fluctuate and the implicit multiple of

earnings at which the noncontrolling interest subject to put

provisions may ultimately be settled could vary significantly

from Fresenius Group’s current estimates.

Derivative financial instruments, which primarily include

foreign currency forward contracts and interest rate swaps,

are recognized at fair value as assets or liabilities in the consol-

idated statement of financial position. Changes in the fair

value of derivative financial instruments classified as fair value

hedges and in the corresponding underlying assets and lia-

bilities are recognized periodically in earnings. The effective

portion of changes in fair value of cash flow hedges is recog-

nized in accumulated other comprehensive income (loss) in

shareholders’ equity until the secured underlying transaction

is realized (see note 29, Financial instruments). The ineffec-

tive portion of cash flow hedges is recognized in current earn-

ings. Changes in the fair value of derivatives that are not

designated as hedging instruments are recognized periodically

in earnings.

Derivatives embedded in host contracts are accounted for

as separate derivatives if their economic characteristics and

risks are not closely related to those of the host contracts and

the host contracts are not held for trading or designated at

fair value though profit or loss. These embedded derivatives

are measured at fair value with changes in fair value recog-

nized in the income statement.

u) liabilitiesliabilities are generally stated at present value, which nor-

mally corresponds to the value of products or services which

are delivered. As a general policy, short-term liabilities are

measured at their repayment amount.

v) legal contingenciesIn the ordinary course of Fresenius Group’s operations, the

Fresenius Group is involved in litigation, arbitration, adminis-

trative procedure and investigations relating to various aspects

of its business. The Fresenius Group regularly analyzes cur-

rent information about such claims for probable losses and pro-

vides accruals for such matters, including the estimated legal

expenses and consulting services in connection with these

matters, as appropriate. The Fresenius Group utilizes its inter-

nal legal department as well as external resources for these

assessments. In making the decision regarding the need for a

loss accrual, the Fresenius Group considers the degree of

probability of an unfavorable outcome and its ability to make

a reasonable estimate of the amount of loss.

The filing of a suit or formal assertion of a claim, or the

disclosure of any such suit or assertion, does not necessarily

indicate that an accrual of a loss is appropriate.


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w) accrued expensesAccruals for taxes and other obligations are recognized when

there is a present obligation to a third party arising from

past events, it is probable that the obligation will be settled in

the future and the amount can be reliably estimated.

Accruals for warranties and complaints are estimated based

on historical experience.

Tax accruals include obligations for the current year and

for prior years.

x) Pension liabilities and similar obligationsThe Fresenius Group recognizes the underfunded status of its

defined benefit plans, measured as the difference between

the fair value of the plan assets and the present value of the

benefit obligation, as a liability (funded status).

The Fresenius Group uses December 31 as the measure-

ment date when measuring the funded status of all plans.

Changes in the funded status of a plan resulting from actu-

arial gains or losses and prior service costs or credits that

are not recognized as components of the net periodic benefit

cost are recognized through accumulated other comprehen-

sive income (loss), net of tax, in the year in which they occur.

The Fresenius Group uses the corridor method for the

recognition of the actuarial gains and losses. Actuarial gains

and losses that exceed a corridor of 10% of the present value

of the defined benefit obligation are spread over the expected

average remaining working lives of the employees participat-

ing in the plans, adjusted for fluctuation.

Actuarial gains or losses and prior service costs are sub-

sequently recognized as components of net periodic benefit

cost when realized.

y) Debt issuance costsDebt issuance costs are capitalized separately from the

underlying debt and are amortized over the term of the related

obligation.

z) Stock option plansIn line with the standard for share-based payment, the

Fresenius Group uses the modified prospective transition

method. Under this transition method, in 2013 and 2014,

the Fresenius Group recognized compensation cost for all

stock-based payments subsequent to January 1, 2011 (based

on the grant-date fair value estimated).

The measurement date fair value of cash-settled phantom

stocks granted to members of the Management Board and

executive employees of the Fresenius Group is calculated using

the Monte Carlo simulation. The corresponding liability

based on the measurement date fair value is accrued over the

vesting period of the phantom stock plans.

aa) Self-insurance programsUnder the insurance programs for professional, product and

general liability, auto liability and worker’s compensation

claims, the largest subsidiary of Fresenius Medical Care AG &

Co. KGaA (FMC-AG & Co. KGaA), located in North America,

is partially self-insured for professional liability claims. For all

other coverage, FMC-AG & Co. KGaA assumes responsibility

for incurred claims up to predetermined amounts, above which

third party insurance applies. Reported liabilities for the

year represent estimated future payments of the anticipated

expense for claims incurred (both reported and incurred

but not reported) based on historical experience and existing

claim activity. This experience includes both the rate of

claims incidence (number) and claim severity (cost) and is

combined with individual claim expectations to estimate

the reported amounts.

bb) Foreign currency translationThe reporting currency is the euro. Substantially all assets and

liabilities of the foreign subsidiaries that use a functional

currency other than the euro are translated at the mid-closing

rate on the date of the statement of financial position, while

income and expense are translated at average exchange rates.

Adjustments due to foreign currency trans lation fluctuations

are excluded from net earnings and are reported in accumu-

lated other comprehensive income (loss). In addition, the

translation adjustments of certain intercompany borrowings,

which are of a long-term nature, are also reported in accu-

mulated other comprehensive income (loss).


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Gains and losses arising from the translation of foreign

currency positions as well as those arising from the elimination

of foreign currency intercompany loans are recorded as

general and administrative expenses, as far as they are not

considered foreign equity instruments. In the fiscal year

2014, only immaterial gains resulted out of this translation.

The exchange rates of the main currencies affecting foreign currency translation developed as follows:

Year-end exchange rate 1 Average exchange rate

Dec. 31, 2014 Dec. 31, 2013 2014 2013

U.S. dollar per € 1.2141 1.3791 1.3285 1.3281

Pound sterling per € 0.7789 0.8337 0.8061 0.8493

Swedish krona per € 9.3930 8.8591 9.0985 8.6515

Chinese renminbi per € 7.5358 8.3491 8.1857 8.1646

Japanese yen per € 145.23 144.72 140.31 129.66

Russian ruble per € 72.3370 45.3246 50.9518 42.3370

Brazilian real per € 3.2207 3.2576 3.1211 2.8687

1 Mid-closing rate on the date of the statement of financial position

cc) Fair value hierarchyThe three-tier fair value hierarchy as defined in Financial

Accounting Standards Boards Accounting Standards Codifica-

tion Topic 820, Fair Value Measurements and Disclosures,

classifies assets and liabilities recognized at fair value based

on the inputs used in estimating the fair value. level 1 is

defined as observable inputs, such as quoted prices in active

markets. level 2 is defined as inputs other than quoted prices

in active markets that are directly or indirectly observable.

level 3 is defined as unobservable inputs for which little or

no market data exists, therefore requiring the company to

develop its own assumptions. The three-tier fair value hierar-

chy is used in note 24, Pensions and similar obligations, and

in note 29, Financial instruments.

dd) use of estimatesThe preparation of consolidated financial statements in con-

formity with U.S. GAAP requires management to make esti-

mates and assumptions that affect the reported amounts of

assets and liabilities, the disclosure of contingent assets and

liabilities at the date of the consolidated financial statements

and the reported amounts of income and expenses during

the reporting period. Actual results could differ from those

estimates. Estimates and discretionary decisions are required

in particular for the positions trade accounts receivable,

deferred tax assets and pension liabilities as well as when

examining the recoverability of goodwill.

ee) receivables managementThe entities of the Fresenius Group perform ongoing eval-

uations of the financial situation of their customers and gener-

ally do not require a collateral from the customers for the

supply of products and provision of services. Approximately

16% and 17% of Fresenius Group’s sales were earned and

subject to the regulations under governmental health care pro-

grams, Medicare and Medicaid, administered by the United

States government in 2014 and 2013, respectively.

ff) recent pronouncements, appliedThe Fresenius Group has prepared its consolidated financial

statements at December 31, 2014 in conformity with U.S. GAAP

that have to be applied for fiscal years beginning on Janu-

ary 1, 2014 or U.S. GAAP that can be applied earlier on a vol-

untary basis.

The Fresenius Group applied the following standards, as

far as they are relevant for Fresenius Group’s business, for

the first time:

In November 2014, the Financial Accounting Standards

Board (FASB) issued accounting Standards update 2014-17

(ASU 2014-17), FASB Accounting Standards Codification

(ASC) Topic 805, Business Combinations – Pushdown Account-

ing. ASU 2014-17’s objective is to provide an acquired entity

with an option to apply pushdown accounting in its separate

financial statements. This option is given upon occurrence

of an event in which an acquirer obtains control of the acquired

entity. The update is effective on November 18, 2014 and

has been adopted by the Fresenius Group as of November 18,

2014. ASU 2014-17 does not have an impact on the consoli-

dated financial statements of the Fresenius Group.


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In November 2014, the FASB issued accounting Standards

update 2014-16 (ASU 2014-16), FASB ASC Topic 815,

Derivatives and Hedging – Determining Whether the Host

Contract in a Hybrid Financial Instrument Issued in the

Form of a Share Is More Akin to Debt or to Equity. ASU 2014-

16’s objective is to eliminate the use of different methods in

practice and thereby reduce existing diversity under U.S. GAAP

in the accounting for hybrid financial instruments issued in

the form of a share. The update is effective for fiscal years and

interim periods within those years beginning on or after

December 15, 2015. As early adoption is permissible and the

Fresenius Group’s financial statements are in conformity

with the update, the Fresenius Group has adopted ASU 2014-

16 as of November 4, 2014. ASU 2014-16 does not have a

material impact on the consolidated financial statements of the

Fresenius Group.

In June 2014, the FASB issued accounting Standards

update 2014-12 (ASU 2014-12), FASB ASC Topic 718, Com-

pensation – Stock Compensation – Accounting for Share-

Based Payments When the Terms of an Award Provide That a

Performance Target Could Be Achieved after the Requisite

Service Period. The amendments in ASU 2014-12 require that

a performance target that affects vesting and that could be

achieved after the requisite service period is treated as a per-

formance condition. The update is effective for fiscal years

and interim periods within those years beginning on or after

December 15, 2015. Earlier adoption is permitted. The

Fresenius Group utilized and will continue to utilize the guid-

ance updated by this ASU and as such there is no expected

impact on its consolidated financial statements.

In July 2013, the FASB issued accounting Standards

update 2013-11 (ASU 2013-11), FASB ASC Topic 740, Income

Taxes – Presentation of an Unrecognized Tax Benefit When a

Net Operating loss Carryforward, a Similar Tax loss, or a Tax

Credit Carryforward Exists. The purpose of ASU 2013-11 is to

align the financial statement presentation of an unrecognized

tax benefit when a net operating loss carryforward, a similar

tax loss or a tax credit carryforward exists. In most cases, the

unrecognized tax benefit should be presented as a reduction

to a deferred tax asset for a net operating loss carryforward,

a similar tax loss or a tax credit carryforward. The update is

effective for fiscal years and interim periods within those years

beginning on or after December 15, 2013. The Fresenius

Group adopted ASU 2013-11 as of January 1, 2014. ASU 2013-

11 does not have a material impact on the consolidated

financial statements of the Fresenius Group.

In March 2013, the FASB issued accounting Standards

update 2013-05 (ASU 2013-05), FASB ASC Topic 830, For-

eign Currency Matters – Parent’s Accounting for the Cumula-

tive Translation Adjustment upon Derecognition of Certain

Subsidiaries or Groups of Assets within a Foreign Entity or of

an Investment in a Foreign Entity. The purpose of ASU 2013-

05 is to provide clarification and further refinement regarding

the treatment of the release of a cumulative translation adjust-

ment into net income. This occurs in instances where the

parent sells either a part or all of its investment in a foreign

entity, as well as when a company ceases to hold a control-

ling interest in a subsidiary or group of assets that is a non-

profit activity or business within a foreign entity. The update

is effective for fiscal years and interim periods within those

years beginning on or after December 15, 2013. The Fresenius

Group adopted ASU 2013-05 as of January 1, 2014. ASU 2013-

05 does not have a material impact on the consolidated finan-

cial statements of the Fresenius Group.

In February 2013, the FASB issued accounting Standards

update 2013-04 (ASU 2013-04), FASB ASC Topic 405, lia-

bil ities – Obligations Resulting from Joint and Several liabil-

ity Arrangements for which the Total Amount of the Obliga-

tions is Fixed at the Reporting Date. ASU 2013-04’s objective

is to provide guidance and clarification on the recognition,

measurement and disclosure of obligations resulting from joint

and several liability arrangements such as debt arrangements,

other contractual obligations and settled litigation and judi-

cial rulings. The update is effective for fiscal years and interim

periods within those years beginning on or after December 15,

2013. The Fresenius Group adopted ASU 2013-04 as of Janu-

ary 1, 2014. ASU 2013-04 does not have a material impact on

the consolidated financial statements of the Fresenius Group.

In July 2011, the FASB issued accounting Standards

update 2011-06 (ASU 2011-06), FASB ASC Topic 720, Other

Expenses – Fees Paid to the Federal Government by Health

Insurers. The amendments in ASU 2011-06 address how

health insurers should recognize and classify their income

statement fees mandated by the Health Care and Educational


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Affordability Reconciliation Act. These amendments require

that the liability for the fee be estimated and recorded in full

once the entity provides qualifying health insurance in the

applicable calendar year in which the fee is payable. In con-

junction, the corresponding deferred cost is amortized to

expense using a straight-line allocation method unless another

method better allocates the fee over the entire calendar year

for which it is payable. In addition, the ASU states that this fee

does not meet the definition of an acquisition cost. The dis-

closures required under ASU 2011-06 are effective for calen-

dar years beginning after December 31, 2013, when the fee

initially becomes effective. The Fresenius Group adopted

ASU 2011-06 effective January 1, 2014. ASU 2011-06 does not

have a material impact on the consolidated financial state-

ments of the Fresenius Group.

gg) recent pronouncements, not yet appliedThe FASB issued the following for the Fresenius Group rele -

vant new standards, which are mandatory for fiscal years com-

mencing on or after January 1, 2015:

In June 2014, the FASB issued accounting Standards

update 2014-11 (ASU 2014-11), FASB ASC Topic 860, Trans-

fers and Servicing – Repurchase-to-Maturity Transactions,

Repurchase Financings, and Disclosures, which aligns the

accounting for repurchase-to-maturity transactions and repur-

chase financing arrangements with the accounting for other

typical repurchase agreements, i. e. these transactions will be

accounted for as secured borrowings. ASU 2014-11 also

requires additional disclosures about repurchase agreements

and other similar transactions. The update is effective for

fiscal years and interim periods within those years beginning

on or after December 15, 2014. ASU 2014-11 will not have

a material impact on the consolidated financial statements of

the Fresenius Group.

In May 2014, the FASB issued accounting Standards

update 2014-09 (ASU 2014-09), FASB ASC Topic 606, Revenue

from Contracts with Customers. Simultaneously, the Inter-

national Accounting Standards Board (IASB) published its

equivalent revenue standard, IFRS 15, Revenue from Contracts

with Customers. The standards are the result of a conver-

gence project between FASB and the IASB. This update spec-

ifies how and when companies reporting under U.S. GAAP

will recognize revenue as well as providing users of financial

statements with more informative and relevant disclosures.

ASU 2014-09 supersedes some guidance included in Topic

605, Revenue Recognition, some guidance within the scope of

Topic 360, Property, Plant, and Equipment, and some guid-

ance within the scope of Topic 350, Intangibles – Goodwill and

Other. This ASU applies to nearly all contracts with custom-

ers, unless those contracts are within the scope of other stan-

dards (for example, lease contracts or insurance contracts).

This update is effective for fiscal years and interim periods

within those years beginning on or after December 15, 2016.

Earlier adoption is not permitted. The Fresenius Group is

currently evaluating the impact of ASU 2014-09 on its consol-

idated financial statements.

In April 2014, the FASB issued accounting Standards

update 2014-08 (ASU 2014-08), FASB ASC Topic 205, Pre-

sentation of Financial Statements and FASB ASC Topic 360,

Property, Plant, and Equipment – Reporting Discontinued

Operations and Disclosures of Disposals of Components of an

Entity. ASU 2014-08’s objective is to reduce the complexity

and difficulty in applying guidance for discontinued opera-

tions. ASU 2014-08’s main focus is to limit the presentation

to disposals representing a strategic shift that has a major

effect on operations or financial results. The update is effec-

tive for fiscal years and interim periods within those years

beginning on or after December 15, 2014. Currently, ASU 2014-

08 will not have a material impact on the consolidated finan-

cial statements of the Fresenius Group.

In January 2014, the FASB issued accounting Standards

update 2014-05 (ASU 2014-05), FASB ASC Topic 853, Ser-

vice Concession Arrangements. ASU 2014-05’s objective is to

specify that an operating entity should not account for a

service concession arrangement that is within the scope of

ASU 2014-05 as a lease. The update is effective for fiscal

years and interim periods within those years beginning on or

after December 15, 2014. ASU 2014-05 will not have a mate-

rial impact on the consolidated financial statements of the

Fresenius Group.


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iV. CritiCal aCCountinG PoliCieS

In the opinion of the Management of the Fresenius Group, the

following accounting policies and topics are critical for the

consolidated financial statements in the present economic envi-

ronment. The influences and judgments as well as the uncer-

tainties which affect them are also important factors to be

considered when looking at present and future operating earn-

ings of the Fresenius Group.

a) recoverability of goodwill and intangible assets with indefinite useful livesThe amount of intangible assets, including goodwill, prod-

uct rights, tradenames and management contracts, repre-

sents a considerable part of the total assets of the Fresenius

Group. At December 31, 2014 and December 31, 2013, the

carrying amount of goodwill and non-amortizable intangible

assets with indefinite useful lives was € 20,076 million and

€ 15,013 million, respectively. This represented 50% and 46%,

respectively, of total assets.

An impairment test of goodwill and non-amortizable intan-

gible assets with indefinite useful lives is performed at least

once a year, or if events occur or circumstances change that

would indicate the carrying amount might be impaired (Impair-

ment test).

To determine possible impairments of these assets, the

fair value of the reporting units is compared to their carrying

amount. The fair value of each reporting unit is determined

using estimated future cash flows for the unit discounted by

a weighted-average cost of capital (WACC) specific to that

reporting unit. Estimating the discounted future cash flows

involves significant assumptions, especially regarding future

reimbursement rates and sales prices, number of treatments,

sales volumes and costs. In determining discounted cash

flows, the Fresenius Group utilizes for every reporting unit its

approved three-year budget, projections for years 4 to 10

and a corresponding growth rate for all remaining years. These

growth rates are 0% to 4% for Fresenius Medical Care, 3%

for Fresenius Kabi and 1% for Fresenius Helios and Fresenius

Vamed. Projections for up to 10 years are possible due to

historical experience and the stability of Fresenius Group’s

business, which is largely independent from the economic

cycle. The discount factor is determined by the WACC of the

respective reporting unit. Fresenius Medical Care’s WACC

consisted of a basic rate of 6.01% and the WACC in the busi-

ness segment Fresenius Kabi consisted of a basic rate of

4.86% for 2014, respectively. This basic rate is then adjusted

by a country-specific risk rate and, if appropriate, by a factor

to reflect higher risks associated with the cash flow from

recent material acquisitions, until they are appropriately inte-

grated, within each reporting unit. In 2014, WACCs (after

tax) for the reporting units of Fresenius Medical Care ranged

from 5.96% to 15.73% and WACCs (after tax) for the report-

ing units of Fresenius Kabi ranged from 4.86% to 13.36%. In

the business segments Fresenius Helios and Fresenius Vamed,

the WACC (after tax) was 4.86%, country-specific adjust-

ments did not occur. If the fair value of the reporting unit is less

than its carrying amount, the difference is recorded as an

impairment of the fair value of the goodwill at first. An increase

of the WACC (after tax) by 0.5% would not have resulted in

the recognition of an impairment loss in 2014.

A prolonged downturn in the health care industry with

lower than expected increases in reimbursement rates and / or

higher than expected costs for providing health care ser-

vices could adversely affect the estimated future cash flows of

certain countries or segments. Future adverse changes in a

reporting unit’s economic environment could affect the dis-

count rate. A decrease in the estimated future cash flows

and / or a decline in the reporting unit’s economic environment

could result in impairment charges to goodwill and other

intangible assets with indefinite useful lives which could mate-

rially and adversely affect Fresenius Group’s future operating

results.

b) legal contingenciesThe Fresenius Group is involved in several legal matters arising

from the ordinary course of its business. The outcome of

these matters may have a material effect on the financial posi-

tion, results of operations or cash flows of the Fresenius

Group. For details, please see note 28, Commitments and con-

tingent liabilities.

The Fresenius Group regularly analyzes current informa-

tion about such claims for probable losses and provides accru-

als for such matters, including estimated expenses for legal


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services, as appropriate. The Fresenius Group utilizes its inter-

nal legal department as well as external resources for these

assessments. In making the decision regarding the need for a

loss accrual, the Fresenius Group considers the degree of

probability of an unfavorable outcome and its ability to make

a reasonable estimate of the amount of loss.

The filing of a suit or formal assertion of a claim, or the

disclosure of any such suit or assertion, does not necessarily

indicate that an accrual of a loss is appropriate.

c) allowance for doubtful accountsTrade accounts receivable are a significant asset and the allow-

ance for doubtful accounts is a significant estimate made by

the Management. Trade accounts receivable were € 4,235 mil-

lion and € 3,474 million in 2014 and 2013, respectively, net

of allowance. Approximately 62% of receivables derive from

the business segment Fresenius Medical Care and mainly

relate to the dialysis care business in North America.

The major debtors or debtor groups of trade accounts re-

ceivable were U.S. Medicare and Medicaid health care pro-

grams with 17% and private insurers in the United States with

10% at December 31, 2014. Other than that, the Fresenius

Group has no significant risk concentration, due to its inter-

national and heterogeneous customer structure.

The allowance for doubtful accounts was € 545 million

and € 487 million as of December 31, 2014 and December 31,

2013, respectively.

The allowances are estimates comprised of customer-

specific evaluations regarding their payment history, current

financial stability, and applicable country-specific risks for

overdue receivables. In the Fresenius Group’s opinion, these

analyses result in a well-founded estimate of allowances

for doubtful accounts. From time to time, the Fresenius

Group reviews changes in collection experience to ensure the

appropriateness of the allowances.

A valuation allowance is calculated if specific circum-

stances indicate that amounts will not be collectible. When all

efforts to collect a receivable, including the use of outside

sources where required and allowed, have been exhausted, and

after appropriate management review, a receivable deemed to

be uncollectible is considered a bad debt and written off.

Deterioration in the aging of receivables and collection dif-

ficulties could require that the Fresenius Group increases

the estimates of allowances for doubtful accounts. Additional

expenses for uncollectible receivables could have a signifi-

cant negative impact on future operating results.

d) Self-insurance programsUnder the insurance programs for professional, product and

general liability, auto liability and worker’s compensation

claims, the largest subsidiary of Fresenius Medical Care AG &

Co. KGaA, located in North America, is partially self-insured

for professional liability claims. For further details regarding

the accounting policies for self-insurance programs, please

see note 1. III. aa, Self-insurance programs.

2. aCquiSitionS, DiVeStitureS anD inVeStmentS

aCquiSitionS, DiVeStitureS anD inVeStmentS

The Fresenius Group made acquisitions, investments and pur-

chases of intangible assets of € 2,450 million and € 2,754 mil-

lion in 2014 and 2013, respectively. Of this amount, € 2,214

million was paid in cash and € 236 million was assumed obli-

gations in 2014.


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Fresenius medical CareIn 2014, Fresenius Medical Care spent € 1,495 million on

acquisitions. Besides the transactions described separately in

the following, this amount mainly comprises the purchase of

dialysis clinics, the short-term investment in available for sale

securities and the purchase of intangible assets.

On May 23, 2014, Fresenius Medical Care acquired

MedSpring Urgent Care Centers with operations in Illinois and

Texas. MedSpring Urgent Care Centers’ 14 urgent care cen-

ters provide convenient, consistent, high-quality primary care

and customer service.

On July 1, 2014, Fresenius Medical Care completed a

transaction to become the controlling majority shareholder of

Sound Inpatient Physicians, Inc., United States, a physician

services organization focused on hospitalist and post-acute

care services.

On October 21, 2014, Fresenius Medical Care acquired

National Cardiovascular Partners. National Cardiovascular

Partners is the leading operator of endovascular, vasuclar and

cardiovascular specialty services in the United States.

On November 21, 2014, Fresenius Medical Care, through

Sound Inpatient Physicians, Inc., acquired Cogent Health-

care with more than 650 providers, who offer hospitalist and

intensivist services to more than 80 hospitals throughout

the United States.

Based on preliminary purchase price allocations, Fresenius

Medical Care recorded € 1,287 million of goodwill and € 148

million of intangible assets.

The intangible assets associated with these acquisitions

consist primarily of customer relationships and tradenames

at fair value to be amortized on a straight-line basis over a

weighted-average period of approximately eight to nine years.

In 2013, Fresenius Medical Care spent € 424 million on

acquisitions, mainly for the purchase of dialysis clinics and

the expansion in the laboratory services business.

Fresenius KabiIn 2014, Fresenius Kabi spent € 118 million on acquisitions.

Throughout 2014, Fresenius Kabi purchased further shares

in Fresenius Kabi Oncology ltd., India.

On May 9, 2014, Fresenius Kabi announced the acquisi-

tion of the Brasilian pharmaceutical company Novafarma

Indústria Farmacêutica ltda. After antitrust approval, the trans-

action could be closed on July 3, 2014. Furthermore, on

July 4, 2014, Fresenius Kabi acquired two companies in

Ecuador, Medisumi, a pharmaceutical distributor, as well as

labfarm, an IV antibiotic manufacturer.

In 2013, Fresenius Kabi spent € 131 million on acquisitions,

mainly for a 51% stake in PT Ethica Industri Farmasi, Indone-

sia, production plants in India and China as well as for com-

pounding companies in Germany.

Divestitures

In December 2012, Fresenius Kabi announced that it had

signed an agreement to sell its subsidiary Calea France SAS

(Calea) to The linde Group. Calea is active in the French

homecare market and focuses on respiratory therapy, which

is not a core business of Fresenius Kabi.

The transaction was completed in January 2013. The

gain on disposal in the amount of € 48 million was included

in selling, general and administrative expenses in the con-

solidated statement of income.

Fresenius HeliosIn 2014, Fresenius Helios spent € 824 million on acquisitions.

Thereof, € 816 million related to the acquisition of hospitals

and outpatient facilities of Rhön-Klinikum AG, Germany. Tak-

ing into account the advance payment of € 2,178 million

transferred at the end of the year 2013 in conjunction with

this acquisition, the total purchase price finally added up to

€ 2,994 million.


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In connection with the acquisition of hospitals of Rhön-

Klinikum AG, Fresenius Helios sold two hospitals in Borna and

Zwenkau in the first quarter of 2014 due to antitrust authority

requirements. The corresponding book gain in the amount

of € 22 million before tax is included in selling, general and

administrative expenses in the consolidated statement of

income.

acquisition of hospitals of rhön-Klinikum aG

In fiscal year 2014, Fresenius Helios completed the acquisition

of 41 hospitals and 13 outpatient facilities of Rhön-Klinikum

AG, Germany. The majority of the acquired hospitals and out-

patient facilities was consolidated as of January 1, 2014. In

most instances, 100% of the share capital was purchased, only

in a few cases 94% to 99% of the share capital was acquired.

In relation to HSK Dr. Horst Schmidt Kli niken, 49% of the

share capital was acquired.

The transaction strengthens Fresenius Helios’ position

as Europe’s largest hospital operator and provides the basis

for offering nationwide care models across Germany.

Due to contractual conditions, the Fresenius Group was

primary beneficiary of the majority of the acquired hospitals

and outpatient facilities for the period from January 1, 2014

until the closing of the majority of the transaction on Febru-

ary 27, 2014. During this period, the Fresenius Group there-

fore fully consolidated these companies according to regula-

tions for variable interest entities. The majority of the other

acquired companies has been fully consolidated as of Febru-

ary 27, 2014. The acquired HSK Dr. Horst Schmidt Kliniken

have been consolidated since June 30, 2014 as the Fresenius

Group has rights that give the Fresenius Group the ability

to direct the relevant activities and, hence, the earnings of the

company. The acquired hospital in Cuxhaven has been con-

solidated since August 1, 2014.

The transaction was accounted for as a business combina-

tion. The following table comprises the final fair values of

assets acquired and liabilities assumed at the date of the acqui-

sition. Any adjustments to acquisition accounting until final-

ization on December 31, 2014 was recorded with a correspond-

ing adjustment to goodwill, net of related income tax effects.

€ in millions

Trade accounts receivable 231

Working capital and other assets 405

Assets 995

liabilities - 752

Goodwill 2,245

Noncontrolling interest - 12

Fair value of consideration transferred 3,112

Net cash acquired - 100

transaction amount 3,012

The consideration transferred was fully paid in cash.

The transaction amount contained contingent purchase

price elements in an amount of € 49 million in connection with

the implementation of antitrust authority requirements. The

contingent consideration amounted to € 31 million by the end

of 2014.

The goodwill in the amount of € 2,245 million that was

acquired as part of the acquisition is not deductible for tax

purposes.

Goodwill is an asset mainly representing the market

position of the acquired hospitals, the established nationwide

hospital network, economics of scale of the substantially

grown hospital network and the know-how of employees.

The noncontrolling interests acquired as part of the acqui-

sition are stated at fair value.

In 2014, the acquired hospitals and outpatient facilities

have contributed € 1,791 million to sales and, before integra-

tion costs, € 158 million to the operating income (EBIT) and

€ 65 million to the net income of the Fresenius Group. After

integrations costs, the contribution to the operating income

(EBIT) amounted to € 107 million and the contribution to the

net income of the Fresenius Group was € 24 million.


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In 2013, Fresenius Helios spent € 2,185 million on acquisi-

tions, mainly for advances made in the amount of € 2,178 mil-

lion under a fiduciary arrangement for the acquisition of hos-

pitals and outpatient facilities of Rhön-Klinikum AG.

Fresenius VamedIn 2014, Fresenius Vamed spent € 12 million on acquisitions,

mainly for the acquisition of kneipp-hof Dussnang AG, Swit-

zerland.

In 2013, Fresenius Vamed spent € 16 million on acquisitions,

mainly for the purchase of two hospitals in the Czech Republic.

Corporate / otherDivestitures

On June 30, 2014, the Fresenius Group sold the 5% stake in

Rhön-Klinikum AG which was acquired in 2012 as part of

the takeover offer to the shareholders of Rhön-Klinikum AG.

Sales proceeds of € 160 million were achieved. The corre-

sponding book gain in the amount of € 35 million before tax is

included in selling, general and administrative expenses in

the consolidated statement of income.

During 2013, German government securities with a carrying

amount of € 37 million were divested.

On June 28, 2013, the sale of Fresenius Biotech to the

Fuhrer family, owners of Neopharm, Israel’s second-largest

pharmaceutical company, was closed. The transaction

includes both the trifunctional antibody Removab as well as

the immunosuppressive drug ATG-Fresenius S. The gain

on disposal amounted to € 0 million.

imPaCtS on FreSeniuS GrouP’S

ConSoliDateD FinanCial StatementS

reSultinG From aCquiSitionS

In the fiscal year 2014, all acquisitions have been accounted

for applying the purchase method and accordingly have

been consolidated starting with the date of acquisition. The

excess of the total acquisition costs over the fair value of

the net assets acquired was € 3,882 million and € 510 million

in 2014 and 2013, respectively.

The purchase price allocations are not yet finalized for all

acquisitions. Based on preliminary purchase price allocations,

the recognized goodwill was € 3,650 million and the other

intangible assets were € 232 million. Of this goodwill, € 1,287

million is attributable to the acquisitions of Fresenius Medical

Care, € 99 million to Fresenius Kabi’s acquisitions, € 2,250

million to the acquisitions of Fresenius Helios and € 14 million

to the acquisitions of Fresenius Vamed.

Goodwill is an asset representing the future economic

benefits arising from other assets acquired in a business com-

bination that are not individually identified and separately

recognized. Goodwill arises principally due to the fair value

placed on an established stream of future cash flows versus

building a similar business.

The acquisitions completed in 2014 or included in the

consolidated statements for the first time for a full year, con-

tributed the following amounts to the development of sales

and earnings:

€ in millions 2014

Sales 2,271

EBITDA 204

EBIT 126

Net interest - 99

Net income attributable to shareholders of Fresenius SE & Co. KGaA 21

The acquisitions increased the total assets of the Fresenius

Group by € 4,068 million.


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Notes oN the coNsolidated

statemeNt of iNcome

3. special itemsNet income attributable to shareholders of Fresenius SE &

Co. KGaA for the year 2014 in the amount of € 1,067 million

includes special items relating to the integration of Fenwal

and the acquired Rhön hospitals as well as relating to the

divestment of two HELIOS hospitals and of the Rhön stake.

The special items had the following impact on the consol-

idated statement of income:

€ in millions EBIT

Net income attributable to share holders of Fresenius

SE & Co. KGaA

earnings 2014, adjusted 3,158 1,086

Integration costs for Fenwal - 50 - 33

Integration costs for the acquired Rhön hospitals - 51 - 41

Disposal gain from the divestment of two HELIOS hospitals 22 21

Disposal gain from the divestment of the Rhön stake 35 34

earnings 2014 according to U.s. Gaap 3,114 1,067

Net income attributable to shareholders of Fresenius SE &

Co. KGaA for the year 2013 in the amount of € 1,011 million

included special items relating to the integration of Fenwal.

The special items had the following impact on the consol-

idated statement of income:

€ in millions EBIT

Net income attributable to share holders of Fresenius

SE & Co. KGaA

earnings 2013, adjusted 3,045 1,051

Integration costs for Fenwal - 54 - 40

earnings 2013 according to U.s. Gaap 2,991 1,011

4. salesSales by activity were as follows:


Sales of services 15,176 12,441

less patient service bad debt provision - 228 - 214

Sales of products and related goods 7,713 7,507

Sales from long-term production contracts 564 587

Other sales 6 10

sales 23,231 20,331

A sales analysis by business segment and region is shown in

the segment information on pages 98 to 99.

5. cost of salesCost of sales was comprised of the following:


Cost of services 11,677 9,455

Manufacturing cost of products and related goods 4,217 3,976

Cost of long-term production contracts 493 514

Other cost of sales 2 3

cost of sales 16,389 13,948

6. cost of materialsCost of materials was comprised of cost of raw materials,

supplies and purchased components and cost of purchased

services:


Cost of raw materials, supplies and purchased components 6,079 5,566

Cost of purchased services 974 819

cost of materials 7,053 6,385

7. persoNNel expeNsesCost of sales, selling, general and administrative expenses

and research and development expenses included personnel

expenses of € 8,996 million and € 7,360 million in 2014 and

2013, respectively.

Personnel expenses were comprised of the following:


Wages and salaries 7,209 5,834

Social security contributions, cost of retirement pensions and social assistance 1,787 1,526

thereof retirement pensions 257 207

personnel expenses 8,996 7,360

Fresenius Group’s annual average number of employees by

function is shown below:

2014 2013

Production 35,970 34,247

Service 136,860 107,539

Administration 25,704 21,439

Sales and marketing 10,052 9,580

Research and development 2,047 1,928

total employees (per capita) 210,633 174,733

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consolidated financial statements Notes on the consolidated statement of income

8. selliNG, GeNeral aNd admiNistrative expeNsesSelling expenses were € 841 million (2013: € 801 million) and

mainly included expenditures for sales personnel of € 406 mil-

lion (2013: € 387 million).

General and administrative expenses amounted to € 2,518

million (2013: € 2,243 million) and were related to expendi-

tures for administrative functions not attributable to research

and development, production or selling.

Proceeds of € 203 million (2013: € 324 million) were

included in selling, general and administrative expenses.

9. Net iNterestNet interest of - € 602 million included interest expenses of

€ 730 million and interest income of € 128 million. The main

portion of the interest expenses resulted from Fresenius

Group’s financial liabilities, which are not recognized at fair

value in the consolidated statement of income (see note 29,

Financial instruments). The main portion of interest income

resulted from the valuation of the call options in connection

with the convertible bonds.

10. taxes

iNcome taxes

Income before income taxes was attributable to the following

geographic regions:


Germany 686 515

International 1,826 1,892

total 2,512 2,407

Income tax expenses (benefits) for 2014 and 2013 consisted

of the following:

€ in millionsCurrent

taxesDeferred

taxesincome

taxes

2014

Germany 122 16 138

international 518 44 562

total 640 60 700

2013

Germany 111 - 23 88

International 557 24 581

Total 668 1 669

A reconciliation between the expected and actual income

tax expense is shown in the following table. The expected

corporate income tax expense is computed by applying the

German corporation tax rate (including the solidarity sur-

charge) and the effective trade tax rate on income before

income taxes. The respective combined tax rate was 30.0%

for the fiscal year 2014 (2013: 29.5%).


Computed “expected” income tax expense 754 710

Increase (reduction) in income taxes resulting from:

Items not recognized for tax purposes 52 28

Tax rate differential 35 42

Tax-free income - 60 - 76

Taxes for prior years - 20 - 11

Changes in valuation allowances on deferred tax assets 1 - 14

Noncontrolling interests - 61 - 41

Other - 1 31

income tax 700 669

effective tax rate 27.9% 27.8%

deferred taxes

The tax effects of the temporary differences that gave rise

to deferred tax assets and liabilities at December 31 are pre-

sented below:


deferred tax assets

Accounts receivable 25 16

Inventories 78 65

Other current assets 19 33

Other non-current assets 70 105

Accrued expenses 315 242

Other short-term liabilities 65 56

Other liabilities 44 32

Benefit obligations 236 124

Losses carried forward from prior years 326 260

deferred tax assets, before valuation allowance 1,178 933

less valuation allowance 88 87

deferred tax assets 1,090 846

deferred tax liabilities

Accounts receivable 35 32

Inventories 29 26

Other current assets 14 14

Other non-current assets 974 742

Accrued expenses 13 14

Other short-term liabilities 150 120

Other liabilities 69 102

deferred tax liabilities 1,284 1,050

Net deferred taxes - 194 - 204


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In the consolidated statement of financial position, the net

amounts of deferred tax assets and liabilities are included as

follows:

2014 2013

€ in millionsthereof

short-termthereof

short-term

Deferred tax assets 727 406 535 331

Deferred tax liabilities 921 54 739 48

Net deferred taxes - 194 352 - 204 283

As of December 31, 2014, Fresenius Medical Care has not

recognized a deferred tax liability on approximately € 5.5 bil-

lion of undistributed earnings of its foreign subsidiaries,

because those earnings are considered indefinitely reinvested.

Net operatiNG losses

The expiration of net operating losses is as follows:

for the fiscal years € in millions

2015 16

2016 23

2017 25

2018 26

2019 52

2020 9

2021 8

2022 12

2023 10

2024 and thereafter 138

total 319

The total remaining operating losses of € 911 million can

mainly be carried forward for an unlimited period.

Based upon the level of historical taxable income and

projections for future taxable income, the Management of the

Fresenius Group believes it is more likely than not that the

Fresenius Group will realize the benefits of these deductible

differences, net of the existing valuation allowances, at

December 31, 2014.

UNrecoGNized tax beNefits

Fresenius SE & Co. KGaA and its subsidiaries are subject to

tax audits in Germany and the United States on a regular basis

and ongoing tax audits in other jurisdictions.

In Germany, for Fresenius Medical Care, the tax audit

for the years 2002 through 2005 was completed during 2014

and resulted in payments totaling € 76 million, which had

been previously provided for. The tax years 2006 through 2012

are currently under audit by the tax authorities. Fiscal years

2013 and 2014 are open to audit. The other German entities of

the Fresenius Group are currently subject to tax audits for

the tax years 2006 through 2009. Fiscal years 2010 until 2014

are open to audit. The Fresenius Group recognized and

recorded the current proposed adjustments of this audit period

in the consolidated financial statements. All proposed adjust-

ments are deemed immaterial.

For Fresenius Kabi USA, the tax years 2010 and 2011 are

currently under audit by the tax authorities. Fiscal years 2012

until 2014 are open to audit.

In the United States, for Fresenius Medical Care, the tax

years 2011 and 2012 are currently under audit by the tax

authorities. Fiscal years 2013 and 2014 are open to audit.

Fresenius Medical Care Holdings, Inc. (FMCH) is also subject

to audit in various state jurisdictions. A number of these

audits are in progress and various years are open to audit in

various state jurisdictions. All expected results for both

federal and state income tax audits have been recognized in

the consolidated financial statements.

Fresenius Medical Care filed claims for refunds contesting

the Internal Revenue Service’s (IRS) disallowance of FMCH’s

deductions for civil settlement payments taken by FMCH in

prior year tax returns. As a result of a settlement agreement

with the IRS, Fresenius Medical Care received a partial refund

in September 2008 of US$ 37 million, inclusive of interest,

and preserved its right to pursue claims in the United States

Courts for refunds of all other disallowed deductions, which

totaled approximately US$ 126 million. On December 22, 2008,

Fresenius Medical Care filed a complaint for complete refund

in the United States District Court for the District of Massa-

chusetts, styled as Fresenius Medical Care Holdings, Inc. v.

United States. On August 15, 2012, a jury entered a verdict

for FMCH granting additional deductions of US$ 95 million. On

May 31, 2013, the District Court entered final judgment for

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consolidated financial statements Notes on the consolidated statement of income

11. NoNcoNtrolliNG iNterestAs of December 31, noncontrolling interest in net income in

the Fresenius Group was as follows:


Noncontrolling interest in Fresenius Medical Care 542 576

Noncontrolling interest in Fresenius Vamed 10 9

Noncontrolling interest in the business segments

Fresenius Medical Care 161 109

Fresenius Kabi 20 25

Fresenius Helios 11 7

Fresenius Vamed 1 1

total noncontrolling interest 745 727

In the fiscal year 2014, Fresenius Medical Care AG & Co. KGaA

paid dividends to noncontrolling interests in the amount of

€ 159 million (2013: € 159 million).

12. earNiNGs per shareThe following table shows the earnings per share including

and excluding the dilutive effect from stock options issued

after registration of the capital increase from company’s

funds (stock split 1 : 3, see note 26, Fresenius SE & Co. KGaA

shareholders’ equity) with the commercial register on

August 1, 2014:

2014 2013 1

Numerators, € in millions

Net income attributable to shareholders of Fresenius SE & Co. KGaA 1,067 1,011

less effect from dilution due to Fresenius Medical Care shares 1 1

Income available to all ordinary shares 1,066 1,010

denominators in number of shares

Weighted-average number of ordinary shares outstanding 540,347,847 536,017,956

Potentially dilutive ordinary shares 3,950,327 3,695,064

Weighted-average number of ordinary shares outstanding assuming dilution 544,298,174 539,713,020

basic earnings per ordinary share in € 1.97 1.89

fully diluted earnings per ordinary share in € 1.96 1.87

1 Prior year figures were adjusted accordingly.

FMCH in the refund amount of US$ 50 million. On Septem-

ber 18, 2013, the IRS appealed the District Court’s ruling to the

United States Court of Appeals for the First Circuit (Boston).

On August 13, 2014, the United States Court of Appeals for

the First Circuit (Boston) affirmed the District Court’s order.

The Disctrict Court judgment became final upon the govern-

ment’s decision not to seek a writ of certiorari from the United

States Supreme Court. Accordingly, Fresenius Medical Care

recorded a net tax benefit of approximately US$ 23 million in

the fourth quarter of 2014.

Subsidiaries of Fresenius SE & Co. KGaA in a number of

countries outside of Germany and the United States are also

subject to tax audits. The Fresenius Group estimates that the

effects of such tax audits are not material to the consolidated

financial statements.

The following table shows the changes to unrecognized

tax benefits during the year 2014:


balance at January 1, 2014 248

Increase in unrecognized tax benefits prior periods 27

Decrease in unrecognized tax benefits prior periods - 31

Increase in unrecognized tax benefits current periods 18

Changes related to settlements with tax authorities - 47

Foreign currency translation 19

balance at december 31, 2014 234

Included in the balance at December 31, 2014 are € 226 mil-

lion of unrecognized tax benefits, which would affect the

effective tax rate if recognized. The Fresenius Group is cur-

rently not in a position to forecast the timing and magni-

tude of changes in other unrecognized tax benefits.

It is Fresenius Group’s policy to recognize interest and

penalties related to its tax positions as income tax expense.

During the fiscal year 2014, the Fresenius Group recognized

€ 10 million in interest and penalties. The Fresenius Group

had a total accrual of € 1 million of tax related interest and

pen alties at December 31, 2014.

consolidated financial statements122

Financial S

tatements

Notes oN the coNsolidated

statemeNt of fiNaNcial positioN

13. cash aNd cash eqUivaleNtsAs of December 31, cash and cash equivalents were as follows:


Cash 1,127 846

Time deposits and securities (with a maturity of up to 90 days) 48 18

total cash and cash equivalents 1,175 864

As of December 31, 2014 and December 31, 2013, earmarked

funds of € 52 million and € 22 million, respectively, were

included in cash and cash equivalents.

The Fresenius Group operates a multi-currency notional

pooling cash management system. The Fresenius Group

met the conditions to offset balances within this cash pool for

reporting purposes. At December 31, 2014, € 72 million

(December 31, 2013: € 0 million) of the cash balances and the

equivalent amount of the overdraft balances were offset.

14. trade accoUNts receivableAs of December 31, trade accounts receivable were as follows:


Trade accounts receivable 4,780 3,961

less allowance for doubtful accounts 545 487

trade accounts receivable, net 4,235 3,474

All trade accounts receivable are due within one year.

The following table shows the development of the allow-

ance for doubtful accounts during the fiscal year:


allowance for doubtful accounts at the beginning of the year 487 406

Change in valuation allowances as recorded in the consolidated statement of income 241 284

Write-offs and recoveries of amounts previously written-off - 216 - 185

Foreign currency translation 33 - 18

allowance for doubtful accounts at the end of the year 545 487

15. iNveNtoriesAs of December 31, inventories consisted of the following:


Raw materials and purchased components 527 445

Work in process 451 323

Finished goods 1,440 1,314

less reserves 85 68

inventories, net 2,333 2,014

The companies of the Fresenius Group are obliged to pur-

chase approximately € 740 million of raw materials and pur-

chased components under fixed terms, of which € 456 mil-

lion was committed at December 31, 2014 for 2015. The terms

of these agreements run one to six years. Advance payments

from customers of € 427 million (2013: € 248 million) have

been offset against inventories.

Inventories as of December 31, 2014 and December 31,

2013 included approximately € 29 million and approximately

€ 24 million, respectively, of the product Erythropoietin (EPO).

Fresenius Medical Care’s previous contract with its EPO sup-

plier Amgen, Inc. expired on December 31, 2014. As a result,

Fresenius Medical Care entered into a new four-year sourcing

and supply agreement with Amgen, Inc.

The following table shows the aging analysis of trade accounts receivable and their allowance for

doubtful accounts:

€ in millionsnot

overdue

up to 3 months overdue

3 to 6 months overdue

6 to 12 months overdue

more than 12 months

overdue total

Trade accounts receivable 2,737 866 352 298 527 4,780

less allowance for doubtful accounts 33 92 59 75 286 545

trade accounts receivable, net 2,704 774 293 223 241 4,235

consolidated financial statements Notes on the consolidated statement of financial position 123

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The purchase price deposit in the amount of € 2,178 million,

that was shown under other non-current assets as of Decem-

ber 31, 2013, was offset in the course of the acquisition of

hospitals and outpatient facilities of Rhön-Klinikum AG in the

first quarter of 2014.

As of December 31, 2014, investments were comprised of

investments of € 558 million (2013: € 482 million), mainly

regarding the joint venture between Fresenius Medical Care

and Galenica Ltd., that were accounted for under the equity

method. In 2014, income of € 19 million (2013: € 20 million)

resulting from this valuation was included in selling, general

and administrative expenses in the consolidated statement of

income. Securities and long-term loans included € 148 mil-

lion financial assets available for sale as of December 31, 2014

(2013: € 197 million) mainly relating to shares in funds. At

December 31, 2013, these mainly referred to shares in Rhön-

Klinikum AG with acquisition costs of € 124 million and a

fair value of € 147 million. Furthermore, securities and long-

term loans included € 148 million as of December 31, 2014

that Fresenius Medical Care loaned to a middle-market dialy-

sis provider.

The receivables resulting from the German hospital law

primarily contain approved but not yet received earmarked

subsidies of the Fresenius Helios operations. The approval is

evidenced in a letter written by the granting authorities that

Fresenius Helios has already received.

In the fiscal years 2014 and 2013, depreciation on other

non-current assets was recognized in an immaterial amount.

16. other cUrreNt aNd NoN-cUrreNt assetsAs of December 31, other current and non-current assets were comprised of the following:

2014 2013


short-termthereof

short-term

Investments 620 0 534 0

Prepaid expenses 133 69 129 64

Capitalized debt financing costs 109 16 95 13

Advances made 86 55 60 60

Prepaid rent and insurance 69 69 55 55

Purchase price deposits 0 0 2,178 0

Other assets 661 500 514 380

other non-financial assets, net 1,678 709 3,565 572

Tax receivables 462 434 254 233

Securities and long-term loans 362 152 377 46

Accounts receivable resulting from German hospital law 249 233 168 153

Derivative financial instruments 176 30 32 30

Cost report receivable from Medicare and Medicaid 113 113 94 94

Leasing receivables 91 46 78 36

Discounts 72 72 78 78

Deposits 65 21 48 19

Assets held for sale 33 33 0 0

other financial assets, net 1,623 1,134 1,129 689

other assets, net 3,301 1,843 4,694 1,261

Allowances 10 7 11 9

other assets, gross 3,311 1,850 4,705 1,270


Financial S

tatements

17. property, plaNt aNd eqUipmeNtAs of December 31, the acquisition and manufacturing costs as well as accumulated depreciation of property, plant

and equipment consisted of the following:

ACqUISITION AND MANUFACTURING COSTS

€ in millionsAs of

Jan. 1, 2014

Foreign currency

translation

Changes in entities

consolidated AdditionsReclassifi-

cations Disposalsas of

dec. 31, 2014

Land and land facilities 294 1 221 11 – 3 524

Buildings and improvements 3,825 178 615 208 170 133 4,863

Machinery and equipment 4,961 239 192 526 161 172 5,907

Machinery, equipment and rental equipment under capital leases 145 2 25 8 - 8 1 171

Construction in progress 584 29 63 551 - 358 7 862

property, plant and equipment 9,809 449 1,116 1,304 - 35 316 12,327

DEPRECIATION


Jan. 1, 2014

Foreign currency

translation

Changes in entities



dec. 31, 2014

Land and land facilities 6 – 0 – 0 – 6

Buildings and improvements 1,732 106 2 257 - 1 65 2,031

Machinery and equipment 2,944 136 5 522 - 9 140 3,458

Machinery, equipment and rental equipment under capital leases 44 – – 12 - 4 1 51

Construction in progress 1 – 0 – 4 – 5

property, plant and equipment 4,727 242 7 791 - 10 206 5,551

ACqUISITION AND MANUFACTURING COSTS


Jan. 1, 2013

Foreign currency

translation

Changes in entities



dec. 31, 2013

Land and land facilities 285 - 7 4 17 2 7 294

Buildings and improvements 3,672 - 113 1 93 231 59 3,825

Machinery and equipment 4,665 - 196 4 459 195 166 4,961

Machinery, equipment and rental equipment under capital leases 139 - 1 – 10 – 3 145

Construction in progress 542 - 25 8 489 - 422 8 584

property, plant and equipment 9,303 - 342 17 1,068 6 243 9,809

DEPRECIATION


Jan. 1, 2013

Foreign currency

translation

Changes in entities



dec. 31, 2013

Land and land facilities 6 – 0 1 – 1 6

Buildings and improvements 1,598 - 50 - 3 226 5 44 1,732

Machinery and equipment 2,741 - 107 - 9 472 - 4 149 2,944

Machinery, equipment and rental equipment under capital leases 39 - 1 – 9 - 1 2 44

Construction in progress 1 – 0 – – – 1

property, plant and equipment 4,385 - 158 - 12 708 – 196 4,727

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consolidated financial statements Notes on the consolidated statement of financial position

CARRyING AMOUNTS

€ in millions dec. 31, 2014 Dec. 31, 2013

Land and land facilities 518 288

Buildings and improvements 2,832 2,093

Machinery and equipment 2,449 2,017

Machinery, equipment and rental equipment under capital leases 120 101

Construction in progress 857 583

property, plant and equipment 6,776 5,082

Depreciation on property, plant and equipment for the years

2014 and 2013 was € 791 million and € 708 million, respec-

tively. It is allocated within cost of sales, selling, general and

administrative expenses and research and development

expenses, depending upon the use of the asset.

leasiNG

Machinery and equipment as of December 31, 2014 and 2013

included medical devices which Fresenius Medical Care and

Fresenius Kabi lease to customers, patients and physicians

under operating leases in an amount of € 652 million and

€ 535 million, respectively.

To a lesser extent, property, plant and equipment are also

leased for the treatment of patients by other business seg-

ments.

For details of minimum lease payments see note 21, Debt

and capital lease obligations.

18. Goodwill aNd other iNtaNGible assetsAs of December 31, the acquisition cost and accumulated amortization of intangible assets consisted of the following:

ACqUISITION COST


Jan. 1, 2014

Foreign currency

translation

Changes in entities



dec. 31, 2014

Goodwill 14,826 1,423 3,643 7 – 31 19,868

Patents, product and distribution rights 571 64 0 5 – 7 633

Technology 303 42 0 5 - 1 0 349

Tradenames 182 21 – – - 1 – 202

Non-compete agreements 237 31 15 1 – 3 281

Management contracts 5 1 – 0 0 0 6

Other 771 42 151 55 - 4 15 1,000

Goodwill and other intangible assets 16,895 1,624 3,809 73 - 6 56 22,339


Financial S

tatements

AMORTIzATION


Jan. 1, 2014

Foreign currency

translation

Changes in entities



dec. 31, 2014

Goodwill 0 0 0 0 0 0 0

Patents, product and distribution rights 235 26 0 32 - 1 4 288

Technology 48 8 0 21 – 0 77

Tradenames 0 0 0 0 0 0 0

Non-compete agreements 174 24 0 17 – 3 212

Management contracts 0 0 0 0 0 0 0

Other 371 23 – 76 - 9 13 448

Goodwill and other intangible assets 828 81 – 146 - 10 20 1,025

ACqUISITION COST


Jan. 1, 2013

Foreign currency

translation

Changes in entities



dec. 31, 2013

Goodwill 15,014 - 539 326 29 – 4 14,826

Patents, product and distribution rights 585 - 23 – 16 1 8 571

Technology 321 - 12 2 1 - 8 1 303

Tradenames 175 - 10 17 – – – 182

Non-compete agreements 242 - 11 8 1 0 3 237

Management contracts 6 – - 1 0 – 0 5

Other 684 - 33 78 33 31 22 771

Goodwill and other intangible assets 17,027 - 628 430 80 24 38 16,895

AMORTIzATION


Jan. 1, 2013

Foreign currency

translation

Changes in entities



dec. 31, 2013

Goodwill 0 0 0 0 0 0 0

Patents, product and distribution rights 216 - 8 – 35 – 8 235

Technology 32 - 2 0 20 - 2 – 48

Tradenames 0 0 0 0 0 0 0

Non-compete agreements 162 - 8 0 23 0 3 174

Management contracts 0 0 0 0 0 0 0

Other 319 - 14 - 1 57 17 7 371

Goodwill and other intangible assets 729 - 32 - 1 135 15 18 828

127

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CARRyING AMOUNTS


Goodwill 19,868 14,826

Patents, product and distribution rights 345 336

Technology 272 255

Tradenames 202 182

Non-compete agreements 69 63

Management contracts 6 5

Other 552 400

Goodwill and other intangible assets 21,314 16,067

The split of intangible assets into amortizable and non-amortizable intangible assets is shown in the following tables:

AMORTIzABLE INTANGIBLE ASSETS

dec. 31, 2014 Dec. 31, 2013

€ in millionsacquisition

costaccumulated amortization

carrying amount

Acquisition cost

Accumulated amortization

Carrying amount

Patents, product and distribution rights 633 288 345 571 235 336

Technology 349 77 272 303 48 255

Non-compete agreements 281 212 69 237 174 63

Other 1,000 448 552 771 371 400

total 2,263 1,025 1,238 1,882 828 1,054

Estimated regular amortization expenses of intangible assets for the next five years are shown in the following table:

€ in millions 2015 2016 2017 2018 2019

Estimated amortization expenses 158 150 144 140 136

NON-AMORTIzABLE INTANGIBLE ASSETS

dec. 31, 2014 Dec. 31, 2013

€ in millionsacquisition

costaccumulated amortization

carrying amount

Acquisition cost

Accumulated amortization

Carrying amount

Tradenames 202 0 202 182 0 182

Management contracts 6 0 6 5 0 5

Goodwill 19,868 0 19,868 14,826 0 14,826

total 20,076 0 20,076 15,013 0 15,013

Amortization on intangible assets amounted to € 146 mil-

lion and € 135 million for the years 2014 and 2013, respec-

tively. It is allocated within cost of sales, selling, general

and administrative expenses and research and development

expenses, depending upon the use of the asset.


Financial S

tatements

The carrying amount of goodwill has developed as follows:

€ in millionsFresenius

Medical CareFresenius

KabiFresenius

HeliosFresenius

VamedCorporate /

Otherfresenius

Group

carrying amount as of January 1, 2013 8,657 4,123 2,151 77 6 15,014

Additions 195 138 14 8 0 355

Disposals 0 - 4 0 0 0 - 4

Reclassifications – 0 0 0 0 –

Foreign currency translation - 398 - 141 0 0 0 - 539

carrying amount as of december 31, 2013 8,454 4,116 2,165 85 6 14,826

Additions 1,287 99 2,250 14 0 3,650

Disposals 0 - 3 - 28 0 0 - 31

Reclassifications 0 – 0 0 0 –

Foreign currency translation 1,034 389 0 0 0 1,423

carrying amount as of december 31, 2014 10,775 4,601 4,387 99 6 19,868

The goodwill additions in the segment Fresenius Helios in

2014 mainly resulted from the acquisition of hospitals and

outpatient facilities of Rhön-Klinikum AG.

As of December 31, 2014 and December 31, 2013, the carry-

ing amounts of the other non-amortizable intangible assets

were € 179 million and € 158 million, respectively, for Fresenius

Medical Care as well as € 29 million for Fresenius Kabi.

19. accrUed expeNsesAs of December 31, accrued expenses consisted of the following:

2014 2013


short-termthereof

short-term

Personnel expenses 1,018 885 706 604

Invoices outstanding 314 314 253 253

Self-insurance programs 197 197 147 147

Bonuses and discounts 136 136 115 115

Warranties and complaints 118 117 67 66

Legal matters, advisory and audit fees 87 87 57 57

Accrued variable payments outstanding for acquisition 42 27 35 13

Commissions 28 28 30 30

Special charge for legal matters 0 0 83 83

Other accrued expenses 628 551 512 460

accrued expenses 2,568 2,342 2,005 1,828

The following table shows the development of accrued expenses in the fiscal year:


Jan. 1, 2014

Foreign currency

translation

Changes in entities


cations Utilized Reversedas of

dec. 31, 2014

Personnel expenses 706 37 158 651 - 2 - 482 - 50 1,018

Invoices outstanding 253 3 37 254 - 2 - 200 - 31 314

Self-insurance programs 147 22 0 37 0 - 1 - 8 197

Bonuses and discounts 115 8 2 126 – - 102 - 13 136

Warranties and complaints 67 2 32 42 – - 17 - 8 118

Legal matters, advisory and audit fees 57 4 13 46 - 1 - 28 - 4 87

Accrued variable payments outstanding for acquisition 35 - 1 28 7 – - 20 - 7 42

Commissions 30 – – 24 0 - 21 - 5 28

Special charge for legal matters 83 4 0 0 0 - 87 0 0

Other accrued expenses 512 19 153 400 - 9 - 378 - 69 628

total 2,005 98 423 1,587 - 14 - 1,336 - 195 2,568

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Accruals for personnel expenses mainly refer to bonus, sev-

erance payments, contribution of partial retirement and

holiday entitlements. For details regarding accruals for self-

insurance programs, please see note 1. III. aa, Self-insurance

programs.

In 2001, Fresenius Medical Care recorded a US$ 258 mil-

lion special charge to address legal matters relating to trans-

actions pursuant to the Agreement and Plan of Reorganiza-

tion dated as of February 4, 1996 by and between W.R. Grace &

Co. and Fresenius AG, estimated liabilities and legal expenses

arising in connection with the W.R. Grace & Co. Chapter 11 pro-

ceedings (Grace Chapter 11 Proceedings) and the cost of

resolving pending litigation and other disputes with certain

commercial insurers. During the second quarter of 2003,

the court supervising the Grace Chapter 11 Proceedings

approved a definitive settlement whereby Fresenius Medical

Care agreed to pay US$ 115 million. On February 3, 2014,

Fresenius Medical Care paid US$ 115 million (€ 87 million),

which had been previously accrued. All matters related to the

recorded charge have now been resolved (see note 28, Com-

mitments and contingent liabilities).

20. other liabilitiesAs of December 31, other liabilities consisted of the following:

2014 2013


short-termthereof

short-term

Debtors with credit balances 295 295 227 227

Accounts payable resulting from German hospital law 251 248 130 130

Accounts receivable credit balance 160 58 145 51

Advance payments from customers 69 58 32 32

All other liabilities 491 330 344 193

other non-financial liabilities 1,266 989 878 633

Personnel liabilities 277 272 223 218

Derivative financial instruments 232 80 23 17

Tax liabilities 205 204 145 144

Interest liabilities 172 172 145 145

Leasing liabilities 90 90 72 72

Liabilities held for sale 15 15 0 0

other financial liabilities 991 833 608 596

other liabilities 2,257 1,822 1,486 1,229

The payables resulting from the German hospital law primar-

ily contain earmarked subsidies received but not yet spent

appropriately by Fresenius Helios. The amount not yet spent

appropriately is classified as liability.

At December 31, 2014, the total amount of other non-current

liabilities was € 435 million, thereof € 232 million was due

between one and five years and € 203 million was due after

five years. The statement of financial position line item long-

term accrued expenses and other long-term liabilities of € 661

million also included other long-term accrued expenses of

€ 226 million as of December 31, 2014.


Financial S

tatements

21. debt aNd capital lease obliGatioNs

short-term debt

The Fresenius Group had short-term debt of € 230 million and

€ 959 million at December 31, 2014 and December 31, 2013,

respectively. As of December 31, 2014, this debt consisted of

borrowings by certain entities of the Fresenius Group under

lines of credit with commercial banks. The average interest

rates on these borrowings at December 31, 2014 and 2013

were 5.83% and 1.65%, respectively.

loNG-term debt aNd capital lease

obliGatioNs

As of December 31, long-term debt and capital lease obliga-

tions consisted of the following:


Fresenius Medical Care 2012 Credit Agreement 2,389 1,963

2013 Senior Credit Agreement 2,561 1,709

Bridge Financing Facility 0 1,410

Euro Notes 1,025 859

European Investment Bank Agreements 40 188

Accounts receivable facility of Fresenius Medical Care 281 255

Capital lease obligations 151 94

Other 283 248

Subtotal 6,730 6,726

less current portion 753 855

long-term debt and capital lease obligations, less current portion 5,977 5,871

Maturities of long-term debt and capital lease obligations are shown in the following table:

€ in millionsup to

1 year1 to 3 years

3 to 5 years

more than 5 years

Fresenius Medical Care 2012 Credit Agreement 189 378 1,822 0

2013 Senior Credit Agreement 451 408 794 908

Euro Notes 0 410 353 262

European Investment Bank Agreements 8 16 16 0

Accounts receivable facility of Fresenius Medical Care 0 281 0 0

Capital lease obligations 13 29 12 97

Other 92 93 49 49

long-term debt and capital lease obligations 753 1,615 3,046 1,316

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Aggregate annual repayments applicable to the above listed

long-term debt and capital lease obligations for the years

subsequent to December 31, 2014 are:


2015 753

2016 759

2017 856

2018 795

2019 2,251

Subsequent years 1,316

total 6,730

fresenius medical care 2012 credit agreement Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co. KGaA)

originally entered into a syndicated credit facility ( Fresenius

Medical Care 2012 Credit Agreement) of US$ 3,850 million and

a 5-year period with a large group of banks and institutional

investors (collectively, the Lenders) on October 30, 2012.

On November 26, 2014, the Fresenius Medical Care 2012

Credit Agreement was amended to increase the total credit

facility to approximately US$ 4,400 million and extend the term

for an additional two years until October 30, 2019.

The following tables show the available and outstanding

amounts under the Fresenius Medical Care 2012 Credit Agree-

ment at December 31:

2014

Maximum amount available balance outstanding

€ in millions € in millions

Revolving Credit (in US$) US$ 1,000 million 824 Us$ 36 million 30

Revolving Credit (in €) € 400 million 400 € 0 million 0

US$ Term Loan US$ 2,500 million 2,059 Us$ 2,500 million 2,059

€ Term Loan € 300 million 300 € 300 million 300

total 3,583 2,389

2013



Revolving Credit (in US$) US$ 600 million 435 Us$ 138 million 100

Revolving Credit (in €) € 500 million 500 € 50 million 50

US$ Term Loan US$ 2,500 million 1,813 Us$ 2,500 million 1,813

total 2,748 1,963

As of December 31, 2014, the Fresenius Medical Care 2012

Credit Agreement consisted of:

▶ Revolving credit facilities of approximately US$ 1,500 mil-

lion comprising a US$ 1,000 million revolving facility and

a € 400 million revolving facility, which will be due and

payable on October 30, 2019.

▶ A term loan facility of US$ 2,500 million, also scheduled to

mature on October 30, 2019. quarterly repayments of

US$ 50 million, which began in January 2015 are required

with the remaining balance outstanding due on Octo-

ber 30, 2019.

▶ A term loan facility of € 300 million scheduled to mature

on October 30, 2019. quarterly repayments of € 6 mil-

lion, which began in January 2015 are required with the

remaining balance outstanding due October 30, 2019.

Interest on the credit facilities is, at Fresenius Medical

Care’s option, at a rate equal to either (i) LIBOR or EURIBOR

(as applicable) plus an applicable margin or (ii) the Base

Rate as defined in the Fresenius Medical Care 2012 Credit

Agreement plus an applicable margin. As of December 31,

2014, the U.S. dollar-denominated tranches outstanding

under the Fresenius Medical Care 2012 Credit Agreement

had a weighted-average interest rate of 1.61%. The euro-

denominated tranche had an interest rate of 1.42%.


Financial S

tatements

The applicable margin is variable and depends on Fresenius

Medical Care’s consolidated leverage ratio which is a ratio of

its consolidated funded debt (less cash and cash equivalents)

to consolidated EBITDA (as these terms are defined in the

Fresenius Medical Care 2012 Credit Agreement).

In addition to scheduled principal payments, indebtedness

outstanding under the Fresenius Medical Care 2012 Credit

Agreement would be reduced by portions of the net cash pro-

ceeds received from certain sales of assets.

Obligations under the Fresenius Medical Care 2012 Credit

Agreement are secured by pledges of capital stock of certain

material subsidiaries in favor of the Lenders.

The Fresenius Medical Care 2012 Credit Agreement con-

tains affirmative and negative covenants with respect to FMC-

AG & Co. KGaA and its subsidiaries. Under certain circum-

stances, these covenants limit indebtedness, investments and

restrict the creation of liens. Under the Fresenius Medical

Care 2012 Credit Agreement, FMC-AG & Co. KGaA is required

to comply with a maximum leverage ratio (ratio of net debt

to EBITDA). Additionally, the Fresenius Medical Care 2012

Credit Agreement provides for a limitation on dividends, share

buy-backs and similar payments. Dividends to be paid are

subject to an annual basket, which is € 360 million for 2015,

and will increase in subsequent years. Additional dividends

and other restricted payments may be made subject to the

maintenance of a maximum leverage ratio. In default, the out-

standing balance under the Fresenius Medical Care 2012

Credit Agreement becomes immediately due and payable at

the option of the Lenders.

As of December 31, 2014, FMC-AG & Co. KGaA and its

subsidiaries were in compliance with all covenants under the

Fresenius Medical Care 2012 Credit Agreement.

In addition, at December 31, 2014 and December 31, 2013,

Fresenius Medical Care had letters of credit outstanding in

the amount of US$ 7 million and US$ 9 million, respectively,

which were not included above as part of the balance out-

standing at those dates but which reduce available borrow-

ings under the Revolving Credit Facility.

2013 senior credit agreementOn December 20, 2012, Fresenius SE & Co. KGaA and various

subsidiaries entered into a delayed draw syndicated credit

agreement (2013 Senior Credit Agreement) in the original

amount of US$ 1,300 million and € 1,250 million. The 2013

Senior Credit Agreement was funded on June 28, 2013 and

replaced a prior credit agreement. On August 7, 2013, the

2013 Senior Credit Agreement was extended by a term loan

B facility in the amount of US$ 500 million.

The 2013 Senior Credit Agreement allows for establish-

ment of incremental facilities if certain conditions are met. In

line with these provisions, the 2013 Senior Credit Agree-

ment has been increased on November 27, 2013 by facilities

in the initial amount of € 1,200 million, which at that time

consisted of an incremental term loan facility A of € 600 million,

an incremental term loan facility B of € 300 million and an

incremental revolving facility of € 300 million. These incremen-

tal facilities were drawn down on February 27, 2014 and used

to fund the acquisition of hospitals from Rhön-Klinikum AG.

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The following tables show the available and outstanding amounts under the 2013 Senior Credit Agreement at December 31:

2014



Revolving Credit Facilities (in €) € 900 million 900 € 0 million 0

Revolving Credit Facilities (in US$) US$ 300 million 247 Us$ 0 million 0

Term Loan A (in €) € 1,125 million 1,125 € 1,125 million 1,125

Term Loan A (in US$) US$ 890 million 733 Us$ 890 million 733

Term Loan B (in €) € 297 million 297 € 297 million 297

Term Loan B (in US$) US$ 494 million 406 Us$ 494 million 406

total 3,708 2,561

2013



Revolving Credit Facilities (in €) € 600 million 600 € 0 million 0

Revolving Credit Facilities (in US$) US$ 300 million 218 Us$ 0 million 0

Term Loan A (in €) € 637 million 637 € 637 million 637

Term Loan A (in US$) US$ 980 million 710 Us$ 980 million 710

Term Loan B (in US$) US$ 499 million 362 Us$ 499 million 362

total 2,527 1,709

As of December 31, 2014, the 2013 Senior Credit Agreement

consisted of:

▶ Revolving credit facilities in the aggregate principal

amount of US$ 300 million, € 700 million and a € 200 mil-

lion multicurrency facility with a final repayment date

on June 28, 2018.

▶ Term loan facilities in the aggregate principal amount of

US$ 890 million and € 1,125 million (together Term Loan

A). Term Loan A amortizes and is repayable in unequal

quarterly installments with a final maturity on June 28,

2018.

▶ Term loan facilities in the aggregate principal amount of

US$ 494 million and € 297 million (together Term Loan B).

Term Loan B amortizes and is repayable in quarterly

installments, whereby the majority of the loans is due on

June 28, 2019.

On January 29, 2015, the term loan B facility of € 297 million

under the 2013 Senior Credit Agreement was voluntarily

prepaid. On February 12, 2015, Fresenius SE & Co. KGaA refi-

nanced the revolving credit facilities and the term loan A

tranches in a total amount of € 3,044 million. The new facilities

consist initially of revolving facilities of € 900 million and

US$ 300 million, as well as term loan A facilities of € 1,150 mil-

lion and US$ 850 million. The maturity of these tranches

was extended by two years to June 28, 2020. The term loan B

facility of US$ 494 million remains unchanged.

The maturities of the 2013 Senior Credit Agreement shown

in the consolidated statement of financial position as of

December 31, 2014, already take into account the amendments

made in February 2015.

The interest rate on each borrowing under the 2013 Senior

Credit Agreement is a rate equal to either (i) LIBOR or

EURIBOR (as applicable) plus an applicable margin or (ii) the

Base Rate as defined in the 2013 Senior Credit Agreement

plus an applicable margin. The applicable margin is variable

and depends on the leverage ratio as defined in the 2013

Senior Credit Agreement.

In addition to scheduled principal payments, indebted-

ness outstanding under the 2013 Senior Credit Agreement

will be reduced by mandatory prepayments in the case of

certain sales of assets and the incurrence of certain addi-

tional indebtedness, with the amount to be prepaid depend-

ing on the proceeds which are generated by the respective

transaction.

The 2013 Senior Credit Agreement is guaranteed by

Fresenius SE & Co. KGaA, Fresenius ProServe GmbH,

Fresenius Kabi AG and certain U.S. subsidiaries of Fresenius


Financial S

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Kabi AG. Obligations under the 2013 Senior Credit Agree-

ment are secured by pledges of capital stock of certain mate-

rial subsidiaries of Fresenius Kabi AG, and upon funding of

the incremental facilities in February 2014 are additionally

secured by a pledge of the capital stock of HELIOS Kliniken

GmbH, in favor of the lenders.

The 2013 Senior Credit Agreement contains a number of

customary affirmative and negative covenants and other

payment restrictions. These covenants include limitations on

liens, sale of assets, incurrence of debt, investments and

acquisitions and restrictions on the payment of dividends,

among other items. The 2013 Senior Credit Agreement also

includes financial covenants – as defined in the agreement –

that require Fresenius SE & Co. KGaA and its subsidiaries

(other than Fresenius Medical Care and its subsidiaries) to

maintain a maximum leverage ratio and a minimum interest

coverage ratio.

As of December 31, 2014, the Fresenius Group was in

compliance with all covenants under the 2013 Senior Credit

Agreement.

bridge financing facilityOn October 15, 2013, Fresenius SE & Co. KGaA entered into a

Bridge Financing Facility in the amount of € 1,800 million with

a group of banks. The Bridge Financing Facility was guaran-

teed by Fresenius ProServe GmbH and Fresenius Kabi AG. The

Bridge Financing Facility had been drawn in an amount of

€ 1,500 million on December 30, 2013. The proceeds were

used for advances made in the amount of € 2,178 million under

a fiduciary arrangement for the acquisition of hospitals and

outpatient facilities of Rhön-Klinikum AG.

The Bridge Financing Facility initially had a one year tenor

and had to be mandatorily reduced by the net proceeds of

any capital markets transaction. In line with these provisions,

the facility has been reduced by the net proceeds of the

€ 1,200 million Senior Notes issuances as well as the US$ 300

million Senior Notes issuance that were made in January

and February 2014. For more information, see note 22, Senior

Notes. Due to the refinancing, this portion of the Bridge

Financing Facility in the amount of € 1,410 million is shown

under long-term debt in the consolidated statement of finan-

cial position at December 31, 2013. On February 27, 2014,

the Bridge Financing Facility was voluntarily cancelled before

maturity and the remaining outstanding amount of € 90 mil-

lion was prepaid.

euro NotesAs of December 31, Euro Notes (Schuldscheindarlehen) of the Fresenius Group consisted of the following:

Book value / nominal value€ in millions

Maturity Interest rate 2014 2013

Fresenius Finance B.V. 2008 / 2014 April 2, 2014 5.98% 0 112

Fresenius Finance B.V. 2008 / 2014 April 2, 2014 variable 0 88

Fresenius Finance B.V. 2007 / 2014 July 2, 2014 5.75% 0 38

Fresenius Finance B.V. 2007 / 2014 July 2, 2014 variable 0 62

Fresenius SE & Co. KGaA 2012 / 2016 April 4, 2016 3.36% 156 156

Fresenius SE & Co. KGaA 2012 / 2016 April 4, 2016 variable 129 129

Fresenius SE & Co. KGaA 2013 / 2017 Aug. 22, 2017 2.65% 51 51

Fresenius SE & Co. KGaA 2013 / 2017 Aug. 22, 2017 variable 74 74









Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 8.38% 0 11

Fresenius Medical Care AG & Co. KGaA 2009 / 2014 Oct. 27, 2014 variable 0 23

euro Notes 1,025 859

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The Euro Notes issued by Fresenius Finance B.V. in the amount

of € 300 million, which were due in April and July 2014, were

repaid as scheduled. Fresenius SE & Co. KGaA issued Euro

Notes in the amount of € 334 million for the refinancing of the

€ 300 million Euro Notes as well as for general corporate

purposes on April 2, 2014. In addition, an agreement for the

issuance of further Euro Notes in an amount of € 166 million

was reached. These additional Euro Notes were issued on

July 2, 2014.

On February 22, 2013, Fresenius SE & Co. KGaA issued

Euro Notes in an amount of € 125 million. Proceeds were used

for general corporate purposes.

The Euro Notes issued by Fresenius Medical Care AG & Co.

KGaA in the amount of € 28 million, which were due on Octo-

ber 27, 2014, were repaid as scheduled.

The Euro Notes of Fresenius SE & Co. KGaA are guaran-

teed by Fresenius Kabi AG and Fresenius ProServe GmbH.

The Euro Notes of FMC-AG & Co. KGaA were guaranteed by

Fresenius Medical Care Holdings, Inc. and Fresenius Medical

Care Deutschland GmbH.


compliance with all of its covenants under the Euro Notes.

european investment bank agreements Various subsidiaries of the Fresenius Group maintain credit facilities with the European Investment Bank (EIB).

The following table shows the amounts outstanding under the EIB facilities as of December 31:

Book value € in millions

Maturity 2014 2013

Fresenius Medical Care AG & Co. KGaA 2013 / 2014 0 140

HELIOS Kliniken GmbH 2019 40 48

loans from eib 40 188

The EIB is the not-for-profit long-term lending institution

of the European Union and loans funds at favorable rates for

the purpose of specific capital investment and research and

development projects. The facilities were granted to finance

certain research and development projects, to invest in the

expansion and optimization of existing production facilities

in Germany and for the construction of a hospital.

Repayment of the loan of HELIOS Kliniken GmbH already

started in December 2007 and will continue through Decem-

ber 2019 with constant half-yearly payments.

On June 14, 2013, € 96 million borrowings of Fresenius SE &

Co. KGaA and US$ 91 million borrowings of FMC-AG & Co.

KGaA were due. The loans were repaid as scheduled. In addi-

tion, loans borrowed by Fresenius SE & Co. KGaA of € 100 mil-

lion and FMC-AG & Co. KGaA of US$ 49 million, which were

due at September 10 and 13, 2013, respectively, were repaid

as scheduled.

The loans borrowed by FMC-AG & Co. KGaA, which were

due at February 3 and 17, 2014, respectively, were repaid as

scheduled.


compliance with the covenants contained in the remaining

outstanding loan agreements.


Financial S

tatements

accounts receivable facility of fresenius medical careOn November 24, 2014, the asset securitization facility

(accounts receivable facility) of Fresenius Medical Care was

refinanced for a term expiring on November 24, 2017 with

available borrowings of US$ 800 million.

At December 31, 2014, there were outstanding borrowings

under the accounts receivable facility of US$ 342 million (€ 281

million) (2013: US$ 351 million (€ 255 million)). Fresenius

Medical Care also had letters of credit outstanding in the

amount of US$ 67 million (€ 55 million) at December 31, 2014.

These letters of credit were not included above as part of

the balance outstanding at December 31, 2014, however, they

reduce available borrowings under the accounts receivable

facility.

Under the accounts receivable facility, certain receivables

are sold to NMC Funding Corp. (NMC Funding), a wholly

owned subsidiary of Fresenius Medical Care. NMC Funding

then assigns percentage ownership interests in the accounts

receivable to certain bank investors. Under the terms of

the accounts receivable facility, NMC Funding retains the right,

at any time, to recall all the then outstanding transferred

interests in the accounts receivable. Consequently, the receiv-

ables remain on the consolidated statement of financial posi-

tion and the proceeds from the transfer of percentage owner-

ship interests are recorded as long-term debt.

NMC Funding pays interest to the bank investors, calculated

based on the commercial paper rates for the particular

tranches selected. The average interest rate during 2014 was

1.052%. Refinancing fees, which include legal costs and

bank fees, are amortized over the term of the facility.

credit liNes

In addition to the financial liabilities described before, the

Fresenius Group maintains additional credit facilities which

have not been utilized, or have only been utilized in part, as

of the reporting date. At December 31, 2014, the additional

financial cushion resulting from unutilized credit facilities

was approximately € 3.3 billion.

Syndicated credit facilities accounted for € 2.3 billion. This

portion is comprised of the Fresenius Medical Care 2012

Credit Agreement in the amount of US$ 1,443 million (€ 1,188

million) and the 2013 Senior Credit Agreement in the amount

of US$ 1,393 million (€ 1,147 million). Furthermore, bilateral

facili ties of approximately € 970 million were available. They

include credit facilities which certain entities of the Fresenius

Group have arranged with commercial banks. These credit

facilities are used for general corporate purposes and are usu-

ally unsecured.

In addition, Fresenius SE & Co. KGaA has a commercial

paper program under which up to € 1,000 million in short-term

notes can be issued. As of December 31, 2014, the commer-

cial paper program was not utilized.

Additional financing of up to US$ 800 million can be pro-

vided using the Fresenius Medical Care accounts receivable

facility which had been utilized in the amount of US$ 409 mil-

lion as of December 31, 2014.

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22. seNior NotesAs of December 31, Senior Notes of the Fresenius Group consisted of the following:

Book value € in millions

Notional amount Maturity Interest rate 2014 2013

Fresenius Finance B.V. 2014 / 2019 € 300 million Feb. 1, 2019 2.375% 299 0

Fresenius Finance B.V. 2012 / 2019 € 500 million Apr. 15, 2019 4.25% 500 500

Fresenius Finance B.V. 2013 / 2020 € 500 million July 15, 2020 2.875% 500 500



Fresenius US Finance II, Inc. 2009 / 2015 € 275 million July 15, 2015 8.75% 273 270

Fresenius US Finance II, Inc. 2009 / 2015 US$ 500 million July 15, 2015 9.00% 409 357

Fresenius US Finance II, Inc. 2014 / 2021 US$ 300 million Feb. 1, 2021 4.25% 247 0

FMC Finance VI S.A. 2010 / 2016 € 250 million July 15, 2016 5.50% 249 249

FMC Finance VII S.A. 2011 / 2021 € 300 million Feb. 15, 2021 5.25% 297 295

FMC Finance VIII S.A. 2011 / 2016 € 100 million Oct. 15, 2016 variable 100 100

FMC Finance VIII S.A. 2011 / 2018 € 400 million Sept. 15, 2018 6.50% 397 396

FMC Finance VIII S.A. 2012 / 2019 € 250 million July 31, 2019 5.25% 245 243

Fresenius Medical Care US Finance, Inc. 2007 / 2017 US$ 500 million July 15, 2017 6.875% 410 360

Fresenius Medical Care US Finance, Inc. 2011 / 2021 US$ 650 million Feb. 15, 2021 5.75% 532 468

Fresenius Medical Care US Finance II, Inc. 2011 / 2018 US$ 400 million Sept. 15, 2018 6.50% 327 287

Fresenius Medical Care US Finance II, Inc. 2012 / 2019 US$ 800 million July 31, 2019 5.625% 659 580

Fresenius Medical Care US Finance II, Inc. 2014 / 2020 US$ 500 million Oct. 15, 2020 4.125% 411 0

Fresenius Medical Care US Finance II, Inc. 2012 / 2022 US$ 700 million Jan. 31, 2022 5.875% 577 508

Fresenius Medical Care US Finance II, Inc. 2014 / 2024 US$ 400 million Oct. 15, 2024 4.75% 329 0

senior Notes 7,659 5,113

All Senior Notes included in the table are unsecured.

On January 23, 2014, Fresenius Finance B.V. issued unsecured

Senior Notes of € 750 million. The € 300 million tranche due

2019 has a coupon of 2.375% and was issued at a price of

99.647%. The € 450 million tranche which has a coupon of

3.00% was issued at a price of 98.751% and is due in 2021.

Moreover, Fresenius Finance B.V. placed € 300 million of

unsecured Senior Notes with a maturity of 10 years on Janu-

ary 28, 2014. The Senior Notes have a coupon of 4.00% and

were placed at par. On February 6, 2014, these Senior Notes

were increased by an amount of € 150 million at a price of

102%. The Senior Notes in the nominal amount of € 450 mil-

lion were issued on February 11, 2014.

Furthermore, on February 14, 2014, Fresenius US Finance

II, Inc. issued US$ 300 million of unsecured Senior Notes

with a maturity of seven years. The Senior Notes have a cou-

pon of 4.25% and were issued at par.

Net proceeds of the Senior Notes issued in January and Feb-

ruary 2014 were used to partially refinance the drawing

under the Bridge Financing Facility. On February 27, 2014,

the Bridge Financing Facility was voluntarily cancelled

before maturity and the remaining outstanding amount of

€ 90 million was repaid.

On January 7, 2013, Fresenius announced the early

redemption of the 5.5% Senior Notes due in 2016 that were

issued in 2006. The aggregate principal amount of € 650 mil-

lion was completely repaid on February 7, 2013 at a price

of 100.916% plus accrued and unpaid interest. Initially, the

redemption was financed by utilizing existing credit lines.

Starting end of June 2013, the 2013 Senior Credit Agreement

was used for the refinancing.

On January 24, 2013, Fresenius Finance B.V. issued unse-

cured Senior Notes of € 500 million at par which are due in

2020. Net proceeds were used to refinance the Senior Notes

which were due in January 2013.


Financial S

tatements

The Senior Notes issued by Fresenius US Finance II, Inc.

which are due on July 15, 2015 are shown as current portion

of Senior Notes in the consolidated statement of financial

position.

All Senior Notes of Fresenius Finance B.V. and of Fresenius

US Finance II, Inc. are guaranteed by Fresenius SE & Co. KGaA,

Fresenius Kabi AG and Fresenius ProServe GmbH. The hold-

ers have the right to request that the issuers repurchase the

Senior Notes at 101% of principal plus accrued interest upon

the occurrence of a change of control followed by a decline

in the rating of the respective Senior Notes. All Senior Notes of

Fresenius Finance B.V. and of Fresenius US Finance II, Inc.

may be redeemed prior to their maturity at the option of the

issuers at a price of 100% plus accrued interest and a pre-

mium calculated pursuant to the terms of the indentures under

observ ance of certain notice periods.

Fresenius SE & Co. KGaA has agreed to a number of

covenants to provide protection to the bondholders, which,

under certain circumstances, partly restrict the scope of

action of Fresenius SE & Co. KGaA and its subsidiaries (exclud-

ing Fresenius Medical Care AG & Co. KGaA (FMC-AG & Co.

KGaA) and its subsidiaries). These covenants include restric-

tions on further debt that can be raised, the payment of

dividends, investments, the redemption of subor dinated lia-

bilities and the mortgaging or sale of assets, among other

items. Some of these restrictions are lifted automatically when

the rating of the respective Senior Notes reaches invest-

ment grade. In the event of non-compliance with certain terms

of the Senior Notes, the bondholders (owning in aggregate

more than 25% of the outstanding Senior Notes) are entitled

to call the Senior Notes and demand immediate repayment

plus interest. As of December 31, 2014, the Fresenius Group

was in compliance with all of its covenants.

On October 29, 2014, Fresenius Medical Care US

Finance II, Inc., issued US$ 500 million and US$ 400 million

US$-denominated unsecured Senior Notes to repay a short-

term loan under the Fresenius Medical Care 2012 Credit

Agreement as well as other short-term debt, and for acquisi-

tions and general corporate purposes. The Senior Notes were

issued at par.

The Senior Notes of Fresenius Medical Care US Finance,

Inc., Fresenius Medical Care US Finance II, Inc., FMC

Finance VI S.A., FMC Finance VII S.A. and FMC Finance VIII

S.A. (wholly owned subsidiaries of FMC-AG & Co. KGaA)

are guaranteed on a senior basis jointly and severally by

FMC-AG & Co. KGaA, Fresenius Medical Care Holdings, Inc. and

Fresenius Medical Care Deutschland GmbH. The holders have

the right to request that the respective issuers repurchase

the respective Senior Notes at 101% of principal plus accrued

interest upon the occurrence of a change of control of

FMC-AG & Co. KGaA followed by a decline in the rating of the

respective Senior Notes. The issuers may redeem the Senior

Notes (except for the floating-rate Senior Notes of FMC

Finance VIII S.A.) at any time at 100% of principal plus

accrued interest and a premium calculated pursuant to the

terms of the indentures.

FMC-AG & Co. KGaA has agreed to a number of covenants

to provide protection to the holders which, under certain

circumstances, limit the ability of FMC-AG & Co. KGaA and its

subsidiaries to, among other things, incur debt, incur liens,

engage in sale and leaseback transactions and merge or con-

solidate with other companies or sell assets. As of Decem-

ber 31, 2014, FMC-AG & Co. KGaA and its subsidiaries were in

compliance with all of their covenants under the Senior Notes.

23. coNvertible boNds

freseNiUs se & co. KGaa

On March 18, 2014, Fresenius SE & Co. KGaA placed € 500 mil-

lion equity-neutral convertible bonds due 2019. The bonds

were issued at par. The coupon was fixed at 0%, the initial

conversion price has been determined at € 149.3786. This

represented a 35% premium over the reference share price

of € 110.65081. The reference share price has been deter-

mined as the arithmetic average of Fresenius’ daily volume-

weighted average Xetra share prices over a period of 10 con-

secutive Xetra trading days, starting on March 19, 2014.

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Net proceeds were used to partially fund the acquisition of

hospitals and outpatient facilities of Rhön-Klinikum AG. Due

to the dividend payment in May 2014 and the capital increase

from company’s funds in August 2014, the conversion price

was adjusted. Accordingly, at December 31, 2014, the conver-

sion price was € 49.7249.

The fair value of the derivative embedded in the con-

vertible bonds was € 91 million at December 31, 2014.

Fresenius SE & Co. KGaA has purchased stock options (call

options) to secure against future fair value fluctuations

of this derivative. The call options also had an aggregate

fair value of € 91 million at December 31, 2014.

The conversion will be cash-settled. Any increase of

Fresenius’ share price above the conversion price would be

offset by a corresponding value increase of the call options.

The derivative embedded in the convertible bonds and

the call options are recognized in other non-current liabilities /

assets in the consolidated statement of financial position.

freseNiUs medical care aG & co. KGaa

On September 19, 2014, Fresenius Medical Care AG & Co.

KGaA (FMC-AG & Co. KGaA) placed € 400 million equity-neutral

convertible bonds due 2020. The bonds were issued at par.

The coupon was fixed at 1.125%, the initial conversion price

has been determined at € 73.6448. This represented a 35%

premium over the reference share price of € 54.55171. The

reference share price has been determined as the arithmetic

average of Fresenius Medical Care’s daily volume-weighted

average Xetra share prices over a period of 15 consecutive

Xetra trading days, starting on September 17, 2014. Net pro-

ceeds were used for general corporate purposes.

The fair value of the derivative embedded in the convert-

ible bonds was € 54 million at December 31, 2014. FMC-AG &

Co. KGaA has purchased stock options (call options) to secure

against future fair value fluctuations of this derivative. The

call options also had an aggregate fair value of € 54 million at

December 31, 2014.

The conversion will be cash-settled. Any increase of

Fresenius Medical Care’s share price above the conversion

price would be offset by a corresponding value increase of

the call options.

The derivative embedded in the convertible bonds and

the call options are recognized in other non-current liabilities /

assets in the consolidated statement of financial position.

24. peNsioNs aNd similar obliGatioNs

GeNeral

The Fresenius Group recognizes pension costs and related

pension liabilities for current and future benefits to quali-

fied current and former employees of the Fresenius Group.

Fresenius Group’s pension plans are structured in accor-

dance with the differing legal, economic and fiscal circum-

stances in each country. The Fresenius Group currently has

two types of plans, defined benefit and defined contribution

plans. In general, plan benefits in defined benefit plans are

based on all or a portion of the employees’ years of services

and final salary. Plan benefits in defined contribution plans

are determined by the amount of contribution by the employee

and the employer, both of which may be limited by legis-

lation, and the returns earned on the investment of those con-

tributions.

Upon retirement under defined benefit plans, the Fresenius

Group is required to pay defined benefits to former employ-

ees when the defined benefits become due. Defined benefit

plans may be funded or unfunded. The Fresenius Group has

funded defined benefit plans in particular in the United States,

Norway, the United Kingdom, the Netherlands and Austria.

Unfunded defined benefit plans are located in Germany and

France.


Financial S

tatements

Actuarial assumptions generally determine benefit obliga-

tions under defined benefit plans. The actuarial calculations

require the use of estimates. The main factors used in the

actuarial calculations affecting the level of the benefit obliga-

tions are: assumptions on life expectancy, the discount rate

and future salary and benefit levels. Under Fresenius Group’s

funded plans, assets are set aside to meet future payment

obligations. An estimated return on the plan assets is recog-

nized as income in the respective period. Actuarial gains and

losses are generated when there are variations in the actu-

arial assumptions and by differences between the actual and

the estimated projected benefit obligations and the return

on plan assets for that year. A company’s pension liability is

impacted by these actuarial gains or losses.

Related to defined benefit plans, the Fresenius Group is

exposed to certain risks. Besides general actuarial risks, e. g.

the longevity risk and the interest rate risk, the Fresenius

Group is exposed to market risk as well as to investment risk.

In the case of Fresenius Group’s funded plans, the

defined benefit obligation is offset against the fair value of plan

assets (funded status). A pension liability is recognized in

the consolidated statement of financial position if the defined

benefit obligation exceeds the fair value of plan assets. An

asset is recognized and reported under other assets in the con-

solidated statement of financial position if the fair value of

plan assets exceeds the defined benefit obligation and if the

Fresenius Group has a right of reimbursement against the

fund or a right to reduce future payments to the fund.

Under defined contribution plans, the Fresenius Group pays

defined contributions to an independent third party as

directed by the employee during the employee’s service life

which satisfies all obligations of the Fresenius Group to

the employee. The employee retains all rights to the contri-

butions made by the employee and to the vested portion

of the Fresenius Group paid contributions upon leaving the

Fresenius Group. The Fresenius Group has a main defined

contribution plan in the United States.

defiNed beNefit peNsioN plaNs

At December 31, 2014, the projected benefit obligation (PBO)

of the Fresenius Group of € 1,472 million (2013: € 1,020 mil-

lion) included € 391 million (2013: € 312 million) funded by

plan assets and € 1,081 million (2013: € 708 million) covered

by pension provisions. Furthermore, the pension liability

contains benefit obligations offered by other subsidiaries of

Fresenius Medical Care in an amount of € 35 million (2013:

€ 21 million). The current portion of the pension liability in an

amount of € 17 million is recognized in the consolidated

statement of financial position within short-term accrued

expenses and other short-term liabilities. The non-current por-

tion of € 1,099 million is recorded as pension liability.

The major part of pension liabilities relates to Germany.

At December 31, 2014, 70% of the pension liabilities were

recognized in Germany and 30% predominantly in the rest of

Europe and North America. 57% of the beneficiaries were

located in North America, 31% in Germany and the remainder

throughout the rest of Europe and other continents.

61% of the pension liabilities in an amount of € 1,116 mil-

lion relate to the “Versorgungsordnung der Fresenius-Unter-

nehmen” established in 1988 (Pension plan 1988), which

applies for most of the German entities of the Fresenius Group

except Fresenius Helios. The rest of the pension liabilities

relates to individual plans from Fresenius Helios entities in

Germany and non-German Group entities.

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Plan benefits are generally based on an employee’s years of

service and final salary. Consistent with predominant practice

in Germany, the benefit obligations of the German entities of

the Fresenius Group are unfunded. The German Pension Plan

1988 does not have a separate pension fund.

Fresenius Medical Care Holdings, Inc. (FMCH), a subsid-

iary of Fresenius Medical Care AG & Co. KGaA, has a defined

ben efit pension plan for its employees in the United States

and supplemental executive retirement plans. During the first

quarter of 2002, FMCH curtailed these pension plans. Under

the curtailment amendment for substantially all employees

eligible to participate in the plan, benefits have been frozen

as of the curtailment date and no additional defined benefits

for future services will be earned. FMCH has retained all

employee benefit obligations as of the curtailment date. Each

year, FMCH contributes at least the minimum amount required

by the Employee Retirement Income Security Act of 1974,

as amended. In 2014, FMCH’s minimum funding requirement

was US$ 21 million (€ 16 million). In addition to the compul-

sory con tributions, FMCH voluntarily provided US$ 21 million

(€ 16 million) to the defined benefit plan. Expected funding

for 2015 is US$ 20 million (€ 17 million).

Benefit plans offered by other subsidiaries of Fresenius

Medical Care outside of the United States and Germany

contain separate benefit obligations. The total pension liabil-

ity for these other plans was € 35 million and € 21 million

at December 31, 2014 and 2013, respectively, and consists of

a pension asset of € 56 thousand (2013: € 56 thousand) rec-

ognized as other non-current assets and a current pension lia-

bility of € 2 million (2013: € 1 million), which is recognized as

a current liability in the line item short-term accrued expenses

and other short-term liabilities. The non-current pension lia-

bility of € 33 million (2013: € 20 million) for these plans is

recorded as pension liability in the consolidated statement of

financial position.

Fresenius Group’s benefit obligations relating to fully or partly

funded pension plans were € 638 million. Benefit obligations

relating to unfunded pension plans were € 834 million.

The following table shows the changes in benefit obliga-

tions, the changes in plan assets, the funded status of the

pension plans and the pension liability. Benefits paid as shown

in the changes in benefit obligations represent payments

made from both the funded and unfunded plans while the ben-

efits paid as shown in the changes in plan assets include

only benefit payments from Fresenius Group’s funded benefit

plans.

The pension liability has developed as follows:


benefit obligations at the beginning of the year 1,020 986

Changes in entities consolidated 17 6


Service cost 35 30

Prior service cost - 1 1

Interest cost 43 39

Contributions by plan participants 2 2

Transfer of plan participants – 3

Curtailments / settlements - 2 - 5

Actuarial losses 339 –

Benefits paid - 31 - 27

benefit obligations at the end of the year 1,472 1,020

thereof vested 1,242 868

fair value of plan assets at the beginning of the year 312 294

Changes in entities consolidated 7 –


Actual return on plan assets 19 25

Contributions by the employer 40 15

Contributions by plan participants 2 2

Settlements - 1 - 4

Transfer of plan participants – 3

Benefits paid - 17 - 14

fair value of plan assets at the end of the year 391 312

funded status as of december 31 1,081 708

Benefit plans offered by other subsidiaries 35 21

pension liability as of december 31 1,116 729


Financial S

tatements

As of December 31, 2014 and December 31, 2013, the fair

value of plan assets did not exceed the benefit obligations in

any pension plan.

The discount rates for all plans are based upon yields of

portfolios of equity and highly rated debt instruments with

matur ities that mirror the plan’s benefit obligation. Fresenius

Group’s discount rate is the weighted average of these plans

based upon their benefit obligations.

The following weighted-average assumptions were utilized

in determining benefit obligations as of December 31:

in % 2014 2013

Discount rate 2.77 4.09

Rate of compensation increase 3.00 3.09

Rate of pension increase 1.63 1.67

Mainly changes in the discount factor, as well as inflation

and mortality assumptions used for the actuarial computation

resulted in actuarial losses in 2014 which increased the fair

value of the defined benefit obligation. Unrecognized actu arial

losses were € 634 million (2013: € 293 million).

sensitivity analysisIncreases and decreases in principal actuarial assumptions

by 0.5 percentage points would affect the pension liability as

of December 31, 2014 as follows:

Development of pension liability € in millions0.5 pp

increase0.5 pp

decrease

Discount rate - 130 149

Rate of compensation increase 21 - 21

Rate of pension increase 72 - 64

The sensitivity analysis was calculated based on the average

duration of the pension obligations determined at Decem-

ber 31, 2014. The calculations were performed isolated for

each significant actuarial parameter, in order to show the

effect on the fair value of the pension liability separately. The

sensitivity analysis for compensation increases and for pen-

sion increases excludes the U.S. pension plan, because it is

frozen and therefore is not affected by changes from these

two actuarial assumptions.

At December 31, 2014, the accumulated benefit obliga-

tions for all defined benefit pension plans were € 1,344 million

(2013: € 935 million).

The following table relates to pension plans with pro-

jected benefit obligations and accumulated benefit obligations

in excess of plan assets:


Projected benefit obligation (PBO) 1,472 1,020

Accumulated benefit obligation (ABO) 1,344 935

Fair value of plan assets 391 312

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The pre-tax changes of other comprehensive income (loss) relating to pension liabilities during the years 2014

and 2013 are shown in the following tables:


Jan. 1, 2014 Reclassifications 1 AdditionsForeign currency

translationas of

dec. 31, 2014

Actuarial gains and losses - 293 20 - 339 - 22 - 634

Prior service cost - 1 1 – – –

Transition obligation – – – – –

adjustments related to pension liabilities - 294 21 - 339 - 22 - 634

1 Effects recognized in the consolidated statement of income


Jan. 1, 2013 Reclassifications 1 AdditionsForeign currency

translationas of

dec. 31, 2013

Actuarial gains and losses - 329 23 8 5 - 293

Prior service cost - 1 1 - 1 – - 1

Transition obligation - 1 1 – – –

adjustments related to pension liabilities - 331 25 7 5 - 294

1 Effects recognized in the consolidated statement of income

For the tax effects on other comprehensive income at Decem-

ber 31, 2014 see note 27, Other comprehensive income (loss).

The Fresenius Group expects the following amounts to

be amortized from other comprehensive income into net peri-

odic pension cost in the year 2015:


Actuarial gains and losses 39

Prior service cost 1

Transition obligation –

Defined benefit pension plans’ net periodic benefit costs of

€ 80 million (2013: € 78 million) were comprised of the follow-

ing components:


Service cost 35 30

Interest cost 43 39

Expected return on plan assets - 19 - 16

Amortization of unrealized actuarial losses, net 20 23

Amortization of prior service costs 1 1

Amortization of transition obligations – 1

Settlement loss – –

Net periodic benefit cost 80 78

Net periodic benefit cost is allocated as personnel expense

within cost of sales or selling, general and administrative

expenses as well as research and development expenses. The

allocation depends upon the area in which the beneficiary

is employed.

The following weighted-average assumptions were used

in determining net periodic benefit cost for the year ended

December 31:

in % 2014 2013

Discount rate 4.09 4.10

Expected return of plan assets 4.71 4.99

Rate of compensation increase 3.09 3.13

Rate of pension increase 1.67 1.68

The following table shows the expected benefit payments for

the next 10 years:


2015 34

2016 38

2017 39

2018 41

2019 44

2020 to 2024 273

total expected benefit payments 469

At December 31, 2014, the weighted-average duration of the

defined benefit obligation was 19 years (December 31, 2013:

20 years).


Financial S

tatements

The fair values of plan assets by categories were as follows:

december 31, 2014 December 31, 2013

€ in millions

quoted prices in active markets

for identical assets

level 1

significant observable

inputslevel 2 total

quoted prices in active markets

for identical assets

Level 1

Significant observable

inputsLevel 2 Total

categories of plan assets

Equity investments 56 57 113 45 45 90

Index funds 1 45 57 102 37 45 82

Other equity investments 11 0 11 8 0 8

Fixed income investments 89 154 243 69 115 184

Government securities 2 40 1 41 28 1 29

Corporate bonds 3 30 149 179 19 113 132

Other fixed income investments 4 19 4 23 22 1 23

Other 5 26 9 35 33 5 38

total 171 220 391 147 165 312

1 This category is mainly comprised of low-cost equity index funds not actively managed that track the S & P 500, S & P 400, Russell 2000, the MSCI Emerging Markets Index and the Morgan Stanley International EAFE Index.

2 This category is primarily comprised of fixed income investments by the U.S. government and government sponsored entities.3 This category primarily represents investment grade bonds of U.S. issuers from diverse industries.4 This category is mainly comprised of private placement bonds as well as collateralized mortgage obligations as well as cash and

funds that invest in treasury obligations directly or in treasury backed obligations.5 This category mainly represents cash, money market funds as well as mutual funds comprised of high grade corporate bonds.

The methods and inputs used to measure the fair value of plan

assets are as follows:

Index funds are valued based on market quotes.

Other equity investments are valued at their market prices

as of the date of the statement of financial position.

Government bonds are valued based on both market prices

(Level 1) and market quotes (Level 2).

Corporate bonds and other bonds are valued based on

market quotes as of the date of the statement of financial

position.

Cash is stated at nominal value which equals the fair value.

U.S. Treasury money market funds as well as other money

market and mutual funds are valued at their market prices.

plan investment policy and strategyFor the U.S. funded plan, the Fresenius Group periodically

reviews the assumptions for long-term expected return on pen-

sion plan assets. As part of the assumptions review, a range

of reasonable expected investment returns for the pension plan

as a whole was determined based on an analysis of expected

future returns for each asset class weighted by the allocation

of the assets. The range of returns developed relies both on

forecasts, which include the actuarial firm’s expected long-

term rates of return for each significant asset class or eco-

nomic indicator, and on broad-market historical benchmarks

for expected return, correlation, and volatility for each asset

class. As a result, the expected rate of return on pension plan

assets of the U.S. pension plan was 6% for the year 2014.

The overall investment strategy for the U.S. pension plan

is to achieve a mix of approximately 98% of investments

for long-term growth and income and 2% in cash or cash

equivalents. Investment income and cash or cash equivalents

are used for near-term benefit payments. Investments are

governed by the investment policy and include well diversified

index funds or funds targeting index performance.

The target allocations for plan assets in the United States

are in a range around 30% equity and 70% long-term U.S.

corporate bonds. The investment policy considers that there

will be a time horizon for invested funds of more than five

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years. The total portfolio will be measured against a custom

index that reflects the asset class benchmarks and the target

asset allocation. The plan policy does not allow investments in

securities of Fresenius Medical Care AG & Co. KGaA or other

related party securities. The performance benchmarks for the

separate asset classes include: S & P 500 Index, S & P 400

Mid Cap Index, Russell 2000 Index, MSCI EAFE Index, MSCI

Emerging Markets Index and Barclays Capital Long-Corpo-

rate Bond Index.

The following schedule describes Fresenius Group’s allo-

cation for its funded plans.

in %allocation

2014Allocation

2013Target

allocation

Equity investments 28.86 28.83 31.90

Fixed income investments 61.97 58.98 61.22

Other incl. real estate 9.17 12.19 6.88

total 100.00 100.00 100.00

The overall expected long-term rate of return on assets of

the Fresenius Group amounts to 4.83% compounded annu-

ally. Contributions to plan assets for the fiscal year 2015 are

expected to amount to € 24 million.

defiNed coNtribUtioN plaNs

Fresenius Group’s total expense under defined contribution

plans for 2014 was € 121 million (2013: € 86 million). Of this

amount, € 80 million related to contributions by the Fresenius

Group to several public supplementary pension funds for

employees of Fresenius Helios. Further € 31 million related to

contributions to the U.S. savings plan, which employees of

Fresenius Medical Care Holdings, Inc. (FMCH) can join.

Following applicable collective bargaining agreements, the

Fresenius Group pays contributions for a given number of

employees of Fresenius Helios to the Rheinische zusatz ver sor-

gungskasse (a supplementary pension fund) and to other

public supplementary pension funds (together referred to as

zVK ÖD) to complement statutory retirement pensions.

Given that employees from multiple participating entities are

insured by these zVK ÖDs, these plans are Multi-Employer

plans. Employees are entitled to the benefits defined in the stat-

utes regardless of the contributed amounts.

The plan operates on a pay-as-you-earn system based on

applying a collection rate to given parts of gross remuneration.

Paid contributions are accounted for as personnel

expenses within cost of sales and selling, general and admin-

istrative expenses and amounted to € 80 million in 2014

(2013: € 47 million). Thereof, € 43 million (2013: € 24 million)

were payments to Rheinische zusatzversorgungskasse, to

Versorgungsanstalt des Bundes und der Länder and to zusatz-

versorgungskasse Wiesbaden (supplementary pension funds).

Further disclosures are either irrelevant or immaterial

for plans in supplementary pension funds or the necessary

information cannot be obtained from the zVK ÖDs without

undue cost and effort.

Under the U.S. savings plan, employees can deposit up

to 75% of their pay up to an annual maximum of US$ 17,500

if under 50 years old (US$ 23,000 if 50 or over). Fresenius

Medical Care will match 50% of the employee deposit up to

a maximum Company contribution of 3% of the employee’s

pay. Fresenius Medical Care’s total expense under this

defined contribution plan for the years ended December 31,

2014 and 2013 was € 31 million and € 29 million, respec-

tively.

25. NoNcoNtrolliNG iNterest

NoNcoNtrolliNG iNterest

sUbJect to pUt provisioNs

The Fresenius Group has potential obligations to purchase

the noncontrolling interests held by third parties in certain of

its consolidated subsidiaries. These obligations are in the

form of put provisions and are exercisable at the third-party

owners’ discretion within specified periods as outlined in

each specific put provision. If these put provisions were exer-

cised, the Fresenius Group would be required to purchase

all or part of third-party owners’ noncontrolling interests at

the appraised fair value at the time of exercise.


Financial S

tatements

Noncontrolling interest subject to put provisions changed

as follows:


Noncontrolling interest subject to put provisions as of January 1, 2014 472

Noncontrolling interest subject to put provisions in profit 110

Purchase of noncontrolling interest subject to put provisions 82

Dividend payments - 118

Currency effects and other changes 135

Noncontrolling interest subject to put provisions as of december 31, 2014 681

99.7% of noncontrolling interest subject to put provisions

applied to Fresenius Medical Care at December 31, 2014.

As of December 31, 2014 and 2013, put options with an

aggregate purchase obligation of € 102 million and € 86 mil-

lion, respectively, were exercisable. Three put options were

exercised for a total consideration of € 7 million in 2014

(2013: two put options for a total consideration of € 3 million).

NoNcoNtrolliNG iNterest

Not sUbJect to pUt provisioNs

As of December 31, noncontrolling interest not subject to put

provisions in the Fresenius Group was as follows:


Noncontrolling interest not subject to put provisions in Fresenius Medical Care AG & Co. KGaA 5,360 4,599

Noncontrolling interest not subject to put provisions in VAMED AG 43 38

Noncontrolling interest not subject to put provisions in the business segments

Fresenius Medical Care 482 182

Fresenius Kabi 123 126

Fresenius Helios 134 117

Fresenius Vamed 6 3

total noncontrolling interest not subject to put provisions 6,148 5,065

For further financial information relating to Fresenius

Medical Care see the consolidated segment reporting on

pages 98 to 99.

Noncontrolling interest not subject to put provisions changed

as follows:


Noncontrolling interest not subject to put provisions as of January 1, 2014 5,065

Noncontrolling interest not subject to put provisions in profit 635


Stock options 59

Dividend payments - 240

Currency effects and other changes 332

Noncontrolling interest not subject to put provisions as of december 31, 2014 6,148

26. freseNiUs se & co. KGaa shareholders’ eqUity

sUbscribed capital

development of subscribed capitalcapital increase from company’s funds

(stock split 1 : 3)

On May 16, 2014, the Annual General Meeting of Fresenius

SE & Co. KGaA has resolved a capital increase from company’s

funds with issuance of new shares. For each existing non-

par value share, Fresenius SE & Co. KGaA issued two new non-

par value shares without additional payment to the share-

holders. Accordingly, upon execution of the capital increase,

both the subscribed capital of Fresenius SE & Co. KGaA and

the number of shares issued tripled (stock split 1 : 3).

After registration of the capital increase with the com-

mercial register on August 1, 2014, the subscribed capital

increased to € 540,511,632 (including newly created shares

due to options exercised until this date). The new shares

have full dividend entitlement for the fiscal year 2014. The pro-

portionate amount of the subscribed capital will continue to

be € 1.00 per share.

During the fiscal year 2014, 2,448,113 stock options

were exercised. Consequently, as of December 31, 2014, the

subscribed capital of Fresenius SE & Co. KGaA consisted of

541,532,600 bearer ordinary shares. The shares are issued as

non-par value shares. The proportionate amount of the sub-

scribed capital is € 1.00 per share.

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Notification by shareholdersThe following table shows the notifications disclosed in 2014 in accordance with Section 26 (1) of the German Securities

Trading Act (WpHG). In cases where holdings reached, exceeded or fell below the thresholds on several occasions, only the

most recent notification is mentioned.

Notifying party

Date of reaching, exceeding or falling below Reporting threshold Attribution pursuant to WpHG

Percentage of voting rights

Number of voting rights

The Capital Group Companies, Inc.Los Angeles, United States 1 March 6, 2014 Falling below 3%

section 22 (1) sentence 1 No. 6 in connection with section 22 (1)

sentence 2 and 3 2.92 5,254,430

Commerzbank AGFrankfurt am Main, Germany May 26, 2014 Falling below 5%

thereof pursuant to sections 21, 22 thereof pursuant to section 25

thereof pursuant to section 25a

2.53 0.05 0.00 2.47

4,542,462 95,862

0 4,446,600

BlackRock Advisors Holdings, Inc.New york, United States

September 25, 2014

section 21 (1) thereof pursuant to section 22 (1)

sentence 1 No. 1 thereof pursuant to section 22 (1)

sentence 1 No. 2 in connection with sentence 2

thereof pursuant to section 22 (1) sentence 1 No. 6 in connection with

sentence 2 thereof pursuant to section 22 (1) sentence 1 No. 1 and pursuant to

section 22 (1) sentence 1 No. 6 in connection with sentence 2

3.44

1.49

0.02

1.68

0.26

18,615,308

8,053,557

87,267

9,088,675

1,385,809

BlackRock International Holdings, Inc.New york, United States

September 25, 2014







3.44

1.49

0.02

1.68

0.26

18,615,308

8,053,557

87,267

9,088,675

1,385,809

BR Jersey International Holdings L. P.St. Helier, Jersey, Channel Islands

September 25, 2014







3.44

1.49

0.02

1.68

0.26

18,615,308

8,053,557

87,267

9,088,675

1,385,809

BlackRock, Inc.New york, Ny, United States

November 28, 2014 Falling below 5%

pursuant to sections 21, 22 pursuant to section 25

0.00 5.95 0.00

0 32,197,886

0

BlackRock Holdco 2, Inc.Wilmington, DE, United States



0.00 5.85 0.00

0 31,669,646

0

BlackRock Financial Management, Inc.New york, Ny, United States



0.00 5.44 0.00

0 29,476,463

0

BlackRock Group LimitedLondon, Great Britain 2

December 11, 2014 Falling below 3%




2.9997

1.15

2.16

16,242,207

6,231,342

11,691,115

The voting rights of the individual BlackRock companies are attributed to the controlling company BlackRock, Inc.

1 Attribution of voting rights via Capital Research and Management Company2 The total amount stated does not necessarily equal the sum of the detailed attributed holdings. This results from voting rights having multiple attributions within the BlackRock group structure.


Financial S

tatements

The Else Kröner- Fresenius- Stiftung as major shareholder

informed Fresenius SE & Co. KGaA on December 16, 2014,

that it holds 144,695,094 ordinary shares of Fresenius SE &

Co. KGaA representing 26.72% of the subscribed capital on

December 31, 2014.

All WpHG-notifications by shareholders are published

on the website of the Company www.fresenius.com.

aUthorized capital

In connection with the stock split 1 : 3 described before, by

resolution of the Annual General Meeting on May 16, 2014,

the previous Authorized Capital I was revoked and a new

Authorized Capital I with a proportionally adjusted amount

and a five-year term was created.

In accordance with the new provision in the articles of

association of Fresenius SE & Co. KGaA, the general partner,

Fresenius Management SE, is authorized, with the approval

of the Supervisory Board, until May 15, 2019, to increase

Fresenius SE & Co. KGaA’s subscribed capital by a total amount

of up to € 120,960,000 through a single or multiple issues

of new bearer ordinary shares against cash contributions and /

or contributions in kind (Authorized Capital I).

The number of shares must increase in the same propor-

tion as the subscribed capital. A subscription right must be

granted to the shareholders in principle. In defined cases, the

general partner is authorized, with the consent of the Super-

visory Board, to decide on the exclusion of the shareholders’

subscription right (e. g. to eliminate fractional amounts). For

cash contributions, the authorization can only be exercised if

the issue price is not significantly below the stock exchange

price of the already listed shares at the time the issue price is

fixed with final effect by the general partner. Furthermore,

in case of a capital increase against cash contributions, the

proportionate amount of the shares issued with exclusion of

subscription rights may not exceed 10% of the subscribed

capital. An exclusion of subscription rights in the context of

the use of other authorizations concerning the issuance or

the sale of the shares of Fresenius SE & Co. KGaA or the issu-

ance of rights which authorize or bind to the subscription

of shares of Fresenius SE & Co. KGaA has to be taken into con-

sideration during the duration of the Authorized Capital until

its utilization. In the case of a subscription in kind, the sub-

scription right can be excluded only in order to acquire a com-

pany, parts of a company or a participation in a company.

The authorizations granted concerning the exclusion of sub-

scription rights can be used by Fresenius Management SE

only to such extent that the proportional amount of the total

number of shares issued with exclusion of the subscription

rights does not exceed 20% of the subscribed capital. An

exclusion of subscription rights in the context of the use of

other authorizations concerning the issuance or the sale of

the shares of Fresenius SE & Co. KGaA or the issuance of

rights which authorize or bind to the subscription of shares

of Fresenius SE & Co. KGaA has to be taken into consider-

ation during the duration of the Authorized Capital until its

utilization.

The changes to the Authorized Capital I became effective

upon registration with the commercial register on August 1,

2014.

coNditioNal capital

stock option plansThe following Conditional Capitals exist in order to fulfill the

subscription rights under the stock option plans of Fresenius

SE & Co. KGaA: Conditional Capital I (Stock Option Plan 2003),

Conditional Capital II (Stock Option Plan 2008) and Condi-

tional Capital IV (Stock Option Plan 2013) (see note 33, Stock

options).

Due to the stock split 1 : 3, Conditional Capitals I, II and

IV increased, by operation of law, in the same proportion as the

subscribed capital. After registration with the commercial

register on August 1, 2014, the Conditional Capital I amounted

to € 6,014,670, the Conditional Capital II to € 11,680,542 and

the Conditional Capital IV to € 25,200,000.

option bearer bonds and convertible bondsThe previous authorization to issue option bearer bonds and /

or convertible bonds (Conditional Capital III) dated May 11,

2012 was revoked by resolution of the Annual General Meet-

ing of Fresenius SE & Co. KGaA on May 16, 2014. In line with

the stock split 1 : 3, the same Annual General Meeting approved

a new Conditional Capital III with a proportionally adjusted

amount and a five-year term. The new Conditional Capital III

became effective upon registration with the commercial reg-

ister on August 1, 2014.

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Accordingly, the general partner is authorized, with the

approval of the Supervisory Board, until May 15, 2019, to

issue option bearer bonds and / or convertible bearer bonds,

once or several times, for a total nominal amount of up to

€ 2.5 billion. To fulfill the granted subscription rights, the sub-

scribed capital of Fresenius SE & Co. KGaA is increased con-

ditionally by up to € 48,971,202 through issuing of up to

48,971,202 new bearer ordinary shares. The conditional cap-

ital increase shall only be implemented to the extent that

the holders of cash issued convertible bonds or of cash issued

warrants from option bonds exercise their conversion or

option rights and as long as no other forms of settlement are

used. The new bearer ordinary shares shall participate in

the profits from the start of the fiscal year in which they are

issued.

After registration with the commercial register on

August 1, 2014, the Conditional Capital III amounted to

€ 48,971,202.

The following table shows the development of the Conditional Capital:

in € ordinary shares

Conditional Capital I Fresenius AG Stock Option Plan 2003 2,111,517

Conditional Capital II Fresenius SE Stock Option Plan 2008 4,262,602

Conditional Capital III, approved on May 11, 2012 16,323,734

Conditional Capital IV Fresenius SE & Co. KGaA Stock Option Plan 2013 8,400,000

total conditional capital as of January 1, 2014 31,097,853

Fresenius AG Stock Option Plan 2003 – options exercised - 106,627

Fresenius SE Stock Option Plan 2008 – options exercised - 369,088

total conditional capital as of July 31, 2014 30,622,138

Conditional Capital I after registration of the stock split on August 1, 2014 6,014,670

Conditional Capital II after registration of the stock split on August 1, 2014 11,680,542

Conditional Capital III after registration of the stock split on August 1, 2014 48,971,202

Conditional Capital IV after registration of the stock split on August 1, 2014 25,200,000

Fresenius AG Stock Option Plan 2003 – options exercised after July 31, 2014 - 241,614

Fresenius SE Stock Option Plan 2008 – options exercised after July 31, 2014 - 779,354

total conditional capital as of december 31, 2014 90,845,446

capital reserves

Capital reserves are comprised of the premium paid on the

issue of shares and the exercise of stock options (additional

paid-in capital).

In connection with the capital increase from company’s

funds, the capital reserves were reduced by € 360,341,088

due to a conversion of a portion of the capital reserves into

subscribed capital.

other reserves

Other reserves are comprised of earnings generated by

Group entities in prior years to the extent that they have not

been distributed.

divideNds

Under the German Stock Corporation Act (AktG), the

amount of dividends available for distribution to shareholders

is based upon the unconsolidated retained earnings of

Fresenius SE & Co. KGaA as reported in its statement of finan-

cial position determined in accordance with the German

Commercial Code (HGB).

In May 2014, a dividend of € 1.25 per bearer ordinary share

was approved by Fresenius SE & Co. KGaA’s shareholders at

the Annual General Meeting and paid. The total dividend pay-

ment was € 224.6 million.

share bUy-bacK proGram of

freseNiUs medical care

Fresenius Medical Care completed a share buy-back pro-

gram during the third quarter of 2013. When the program

ended on August 14, 2013, 7,548,951 ordinary shares had

been repurchased in the intended amount of € 385 million

(US$ 505 million).

At December 31, 2014, Fresenius SE & Co. KGaA owned

31.09% of the ordinary voting shares of Fresenius Medical

Care AG & Co. KGaA (December 31, 2013: 31.31%).


Financial S

tatements

27. other compreheNsive iNcome (loss)Other comprehensive income (loss) is comprised of all

amounts recognized directly in equity (net of tax) resulting

from the currency translation of foreign subsidiaries’ financial

statements and the effects of measuring financial instruments

at their fair value as well as the change in benefit obligation.

Changes in the components of other comprehensive

income (loss) in 2014 and 2013 were as follows:

€ in millionsAmount

before taxes Tax effect

Total before noncontrolling

interest after taxes

Noncontrolling interest

Total after noncontrolling

interest after taxes

Cash flow hedges 20 - 5 15 12 27

Change in unrealized gains / losses 2 – 2 3 5

Realized gains / losses due to reclassifications 18 - 5 13 9 22

Change of fair value of available for sale financial assets 41 - 7 34 – 34

Foreign currency translation - 278 11 - 267 - 303 - 570

Actuarial losses on defined benefit pension plans - 2 - 3 - 5 23 18

total changes 2013 - 219 - 4 - 223 - 268 - 491

Cash flow hedges - 1 - 1 - 2 2 –

Change in unrealized gains / losses - 23 5 - 18 - 10 - 28

Realized gains / losses due to reclassifications 22 - 6 16 12 28

Change of fair value of available for sale financial assets - 23 7 - 16 – - 16

Foreign currency translation 422 - 29 393 531 924

Actuarial gains / losses on defined benefit pension plans - 203 60 - 143 - 89 - 232

total changes 2014 195 37 232 444 676

Changes in accumulated other comprehensive income (loss) net of tax by component in 2014 and 2013 were as follows:

€ in millionsCash flow

hedges

Change of fair value of available for

sale financial assets

Foreign currency

translation

Actuarial gains / losses

on defined benefit

pension plans

Total, before non-controlling

interest

Non-controlling

interest

Total, after non-

controlling interest

balance as of december 31, 2012 - 122 - 17 168 - 157 - 128 13 - 115

Other comprehensive income (loss) before reclassifications 2 34 - 267 - 14 - 245 - 285 - 530

Amounts reclassified from accumulated other comprehensive income (loss) 13 0 – 9 22 17 39

Other comprehensive income (loss), net 15 34 - 267 - 5 - 223 - 268 - 491

balance as of december 31, 2013 - 107 17 - 99 - 162 - 351 - 255 - 606

Other comprehensive income (loss) before reclassifications - 18 – 393 - 151 224 426 650

Amounts reclassified from accumulated other comprehensive income (loss) 16 - 16 – 8 8 18 26

Other comprehensive income (loss), net - 2 - 16 393 - 143 232 444 676

balance as of december 31, 2014 - 109 1 294 - 305 - 119 189 70

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Reclassifications out of accumulated other comprehensive income (loss) into net income in 2014 and 2013 were as follows:

Amount of gain or loss reclassified from accumulated other

comprehensive (income) loss

€ in millions 2014 2013Affected line item in the

con solidated statement of income

details about accumulated other comprehensive (income) loss components

Cash flow hedges

Interest rate contracts 34 32 Interest income / expense

Foreign exchange contracts 1 - 2 Cost of sales

Foreign exchange contracts 3 –Selling, general and

administrative expenses

Foreign exchange contracts – – Interest income / expense

Other comprehensive income (loss) 38 30

Tax expense or benefit - 10 - 8

Other comprehensive income (loss), net 28 22

Change of fair value of available for sale financial assets - 23 0Selling, general and

administrative expenses

Tax expense or benefit 7 0

Other comprehensive income (loss), net - 16 0

amortization of defined benefit pension items

Prior service costs 1 1 1

Transition obligations – 1 1

Actuarial gains / losses on defined benefit pension plans 20 23 1

Other comprehensive income (loss) 21 25

Tax expense or benefit - 7 - 8

Other comprehensive income (loss), net 14 17

total reclassifications for the period 26 39

1 Net periodic benefit cost is allocated as personnel expense within cost of sales or selling, general and administrative expenses as well as research and development expenses.


Financial S

tatements

Other nOtes

28. COmmitments and COntingent liabilities

Operating leases and rental payments

Fresenius Group’s subsidiaries lease office and manufactur-

ing buildings as well as machinery and equipment under

various lease agreements expiring on dates through 2101.

Rental expense recorded for operating leases for the years

ended December 31, 2014 and 2013 was € 661 million and

€ 621 million, respectively.

Future minimum rental payments under non-cancellable

operating leases for the years subsequent to December 31,

2014 are:


2015 619

2016 534

2017 451

2018 369

2019 310

Thereafter 1,273

total 3,556

As of December 31, 2014, future investment commitments

existed up to the year 2018 from the acquisition contracts for

hospitals at projected costs of up to € 356 million. Thereof

€ 75 million relates to the year 2015.

Besides the above mentioned contingent liabilities, the

amount of other commitments is immaterial.

legal and regulatOry matters

The Fresenius Group is routinely involved in numerous claims,

lawsuits, regulatory and tax audits, investigations and other

legal matters arising, for the most part, in the ordinary course

of its business of providing health care services and prod-

ucts. Legal matters that the Fresenius Group currently deems

to be material or noteworthy are described below. For the

matters described below in which the Fresenius Group believes

a loss is both reasonably possible and estimable, an estimate

of the loss or range of loss exposure is provided. For the other

matters described below, the Fresenius Group believes that

the loss probability is remote and / or the loss or range of pos-

sible losses cannot be reasonably estimated at this time. The

outcome of litigation and other legal matters is always diffi-

cult to predict accurately and outcomes that are not consis-

tent with Fresenius Group’s view of the merits can occur. The

Fresenius Group believes that it has valid defenses to the

legal matters pending against it and is defending itself vigor-

ously. Nevertheless, it is possible that the resolution of one

or more of the legal matters currently pending or threatened

could have a material adverse effect on its business, results

of operations and financial condition.

Commercial litigationW.r. grace & Co. lawsuit

Fresenius Medical Care was originally formed as a result of

a series of transactions it completed pursuant to the Agree-

ment and Plan of Reorganization dated as of February 4, 1996,

by and between W.R. Grace & Co. and Fresenius SE (formerly:

Fresenius AG) (the Merger). At the time of the Merger, a

W.R. Grace & Co. subsidiary known as W.R. Grace & Co.-Conn.

had signifi cant lia bilities arising out of product-liability related

litigation (including asbestos-related actions), pre-Merger

Consolidated Financial statements Other notes 153

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included the terms of the Settlement Agreement within the

First Amended Plan of reorganization (Grace Bankruptcy Plan)

that was ultimately approved and confirmed by the District

Court. On February 3, 2014, the Court of Appeals dismissed

the last of the appeals of the District Court order confirming

the plan of reorganization, and the Grace Bankruptcy Plan went

effective on that date. Pursuant to the terms of the Settle-

ment Agreement and the Grace Bankruptcy Plan, all actions

asserting fraudulent conveyance and other claims raised on

behalf of asbestos claimants were dismissed with prejudice

and Fresenius Medical Care received protection against

existing and potential future W.R. Grace & Co. related claims,

including fraudulent conveyance and asbestos claims by

operation of injunctions and releases and Fresenius Medical

Care also received indemnification against income tax claims

related to the non-NMC members of the W.R. Grace & Co.

consolidated tax group. Also, pursuant to the Settlement Agree-

ment on February 3, 2014, Fresenius Medical Care paid a

total of US$ 115 million, which had previously been accrued

and is included on Fresenius Group’s consolidated statement

of financial position, to the asbestos personal injury and

property damage trusts created under the Grace Bankruptcy

Plan. No admission of liability was made.

baxter patent dispute “touchscreen interfaces” (1)

On April 4, 2003, Fresenius Medical Care Holdings, Inc.

(FMCH) filed a suit in the U.S. District Court for the Northern

District of California, styled Fresenius USA, Inc., et al., v.

Baxter International, Inc., et al., Case No. C 03-1431, seeking

a declaratory judgment that FMCH does not infringe patents

held by Baxter International, Inc. and its subsidiaries and

affiliates (Baxter), that the patents are invalid, and that Baxter

is without right or authority to threaten or maintain suit

tax claims and other claims unrelated to National Medical

Care, Inc. (NMC), which was W.R. Grace & Co.’s dialysis busi-

ness prior to the Merger. In connection with the Merger,

W.R. Grace & Co.-Conn. agreed to indemnify Fresenius Medical

Care, Fresenius Medical Care Holdings, Inc. (FMCH), and

NMC against all liabilities of W.R. Grace & Co., whether relat-

ing to events occurring before or after the Merger, other

than liabilities arising from or relating to NMC’s operations.

W.R. Grace & Co. and certain of its subsidiaries filed for

reorganization under Chapter 11 of the U.S. Bankruptcy Code

(the Grace Chapter 11 Proceedings) on April 2, 2001.

Prior to and after the commencement of the Grace Chapter

11 Proceedings, class action complaints were filed against

W.R. Grace & Co. and FMCH by plaintiffs claiming to be credi-

tors of W.R. Grace & Co.-Conn., and by the asbestos creditors’

committees on behalf of the W.R. Grace & Co. bankruptcy

estate in the Grace Chapter 11 Proceedings, alleging, among

other things that the Merger was a fraudulent conveyance,

violated the uniform fraudulent transfer act and constituted a

conspiracy. All such cases have been dismissed as part of

the Grace Chapter 11 Proceedings.

In 2003, Fresenius Medical Care reached agreement

with the asbestos creditors’ committees on behalf of the

W.R. Grace & Co. bankruptcy estate and W.R. Grace & Co. in

the matters pending in the Grace Chapter 11 Proceedings

for the settlement of all fraudulent conveyance and tax claims

against it and other claims related to Fresenius Medical

Care that arise out of the bankruptcy of W.R. Grace & Co. The

District Court approved the terms of the settlement agree-

ment as amended (Settlement Agreement) in 2003, and


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against FMCH for alleged infringement of Baxter’s patents. In

general, the asserted patents concern the use of touch screen

interfaces for hemodialysis machines. Baxter filed counter-

claims against FMCH seeking more than US$ 140 million in

monetary damages and injunctive relief, and alleging that

FMCH willfully infringed on Baxter’s patents. On July 17, 2006,

the court entered judgment on a jury verdict in favor of FMCH

finding all asserted claims of Baxter patents invalid as obvi-

ous and / or anticipated in light of prior art.

On February 13, 2007, the court granted Baxter’s motion

to set aside the jury’s verdict in favor of FMCH and reinstated

the patents and entered judgment of infringement. Following

a trial on damages, the court entered judgment on Novem-

ber 6, 2007 in favor of Baxter on a jury award of US$ 14.3 mil-

lion. On April 4, 2008, the court denied Baxter’s motion for

a new trial, established a royalty payable to Baxter of 10% of

the sales price for continuing sales of FMCH’s 2008K hemo-

dialysis machines and 7% of the sales price of related dispos-

ables, parts and service beginning November 7, 2007, and

enjoined sales of the touchscreen-equipped 2008K machine

effective January 1, 2009. Fresenius Medical Care appealed

the court’s rulings to the United States Court of Appeals for the

Federal Circuit (Federal Circuit). On September 10, 2009,

the Federal Circuit reversed the district court’s decision and

determined that the asserted claims in two of the three pat-

ents at issue are invalid. As to the third patent, the Federal Cir-

cuit affirmed the district court’s decision; however, the Court

also vacated the injunction and award of damages. These

issues were remanded to the District Court for reconsideration

in light of the invalidity ruling on most of the claims. Upon

remand, the district court reduced the post-verdict damages

award to US$ 10 million. Separately, the U.S. Patent and

Trademark Office (USPTO) and the Board of Patent Appeals

and Interferences ruled that the remaining Baxter patent is

invalid. On May 17, 2012, the Federal Circuit affirmed the

USPTO’s ruling and invalidated the final remaining Baxter

patent. Baxter appealed to the Federal Circuit claiming that

approximately US$ 20 million of damages awarded to it by the

District Court before the Federal Circuit affirmed the USPTO

ruling constituted a final judgment that may be collected. On

July 2, 2013, the Federal Circuit denied Baxter’s appeal and

ordered the District Court to dismiss the case. The court-

approved escrow account has been terminated and the escrow

funds have been returned to FMCH. On March 5, 2014, Baxter

petitioned the United States Supreme Court to review the

decisions of the Federal Circuit. On May 19, 2014, the U.S. Su-

preme Court denied Baxter’s petition and let stand the Fed-

eral Circuit’s order dismissing the case.

baxter patent dispute “liberty Cycler”

On August 27, 2012, Baxter Health International, Inc. ( Baxter)

filed suit in the U.S. District Court for the Northern District

of Illinois, styled Baxter International, Inc., et al., v. Fresenius

Medical Care Holdings, Inc., Case No. 12-cv-06890, alleging

that Fresenius Medical Care Holdings, Inc.’s Liberty ® cycler

infringes certain U.S. patents that were issued to Baxter

between October 2010 and June 2012. Fresenius Medical Care

believes it has valid defenses to these claims, and will defend

this litigation vigorously.


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product liability litigation

On April 5, 2013, the U.S. Judicial Panel on Multidistrict Litiga-

tion ordered that the numerous lawsuits filed and anticipated

to be filed in various federal courts alleging wrongful death

and personal injury claims against Fresenius Medical Care

Holdings, Inc.’s (FMCH) and certain of its affiliates relating to

FMCH’s acid concentrate products NaturaLyte ® and Granu-

flo ® be transferred and consolidated for pretrial management

purposes into a consolidated multidistrict litigation in the

United States District Court for the District of Massachusetts,

styled In Re: Fresenius Granuflo / Naturalyte Dialysate Prod-

ucts Liability Litigation, Case No. 2013-md-02428. The Mas-

sachusetts state courts subsequently established a similar

consolidated litigation for such cases filed in Massachusetts

county courts, styled In Re: Consolidated Fresenius Cases,

Case No. MICV-2013-03400-O (Massachusetts Superior Court,

Middlesex County). These lawsuits allege generally that inade-

quate labeling and warnings for these products caused harm

to patients. In addition, similar cases have been filed in sev-

eral state courts outside Massachusetts, in some of which

the judicial authorities have established consolidated proceed-

ings for their disposition. The attorneys general of Louisiana

and Mississippi have also filed complaints under their state

deceptive practice statutes and in their state courts based

on allegations similar to those advanced in the personal injury

litigation. FMCH believes that these lawsuits are without merit,

and will defend them vigorously.

In a number of cases with the same subject matter in dis-

pute, Fresenius SE & Co. KGaA and Fresenius Management SE

have become formally involved in the litigation. Also for

these cases, both companies believe the lawsuits to be with-

out merit and intend to defend them vigorously.

Other litigation and potential exposures Fresenius medical Care holdings – Qui tam complaint

(massachusetts)

On February 15, 2011, a whistleblower action under the False

Claims Act against Fresenius Medical Care Holdings, Inc.

(FMCH) was unsealed by order of the United States District

Court for the District of Massachusetts and served by the

relator. The United States has not intervened in the case United

States ex rel. Chris Drennen v. Fresenius Medical Care Hold-

ings, Inc., 2009 Civ. 10179 (D. Mass.). The relator’s complaint,

which was first filed under seal in February 2009, alleges that

FMCH seeks and receives reimbursement from government

payors for serum ferritin and hepatitis B laboratory tests that

are medically unnecessary or not properly ordered by a phy-

sician. On March 6, 2011, the United States Attorney for the

District of Massachusetts issued a subpoena seeking the pro-

duction of documents related to the same laboratory tests that

are the subject of the relator’s complaint. FMCH has cooper-

ated fully in responding to the subpoena, and will vigorously

contest the relator’s complaint.

subpoena “american access Care, llC”

Subpoenas, or search warrants have been issued by federal

and state law enforcement authorities under the supervision of

the United States Attorneys for the Districts of Connecticut,

Southern Florida, Eastern Virginia and Rhode Island to Ameri-

can Access Care, LLC (AAC), which Fresenius Medical Care

acquired in October 2011, and to Fresenius Medical Care’s

subsidiary Fresenius Vascular Care, Inc., which now operates


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former AAC centers as well as its own original facilities. Sub-

poenas have also been issued to certain of Fresenius Medical

Care’s outpatient hemodialysis facilities for records relating to

vascular access treatment and monitoring. Fresenius Medical

Care is cooperating fully in these investigations. Communica-

tions with certain of the investigating United States Attorney

Offices indicate that the inquiry encompasses invoicing and

coding for procedures commonly performed in vas cular ac-

cess centers and the documentary support for the medical

necessity of such procedures. The AAC acquisition agreement

contains customary indemnification obligations with respect

to breaches of rep resentations, warranties or covenants and

certain other specified matters. As of October 18, 2013, a group

of the prior owners of AAC exercised their right pursuant to

the terms of the acquisition agreement to assume responsibil-

ity for responding to certain of the subpoenas. Pursuant to

the AAC acquisition agreement, the prior owners are obligated

to indemnify Fresenius Medical Care for certain liabilities

that might arise from those subpoenas. On February 9, 2015,

Fresenius Medical Care reached an agreement in principle

with the United States Attorney for the Southern District of

Florida to resolve the Southern Florida (Miami) investigation,

which arose from allegations made in whistleblower actions

filed under seal in July 2011. Under the settlement, which

remains contingent on judicial approval, Fresenius Medical

Care will pay US$ 1.2 million to the United States. The settle-

ment and whistleblower complaint relate to actions prior to

Fresenius Medical Care’s acquisition of AAC by a physician

no longer associated with Fresenius Medical Care.

internal review

Fresenius Medical Care has received communications alleg-

ing conduct in countries outside the United States and Ger-

many that may violate the U.S. Foreign Corrupt Practices Act

(FCPA) or other anti-bribery laws. The Audit and Corporate

Governance Committee of Fresenius Medical Care’s Supervi-

sory Board is conducting an investigation with the assistance

of independent counsel. Fresenius Medical Care voluntarily

advised the U.S. Securities and Exchange Commission (SEC)

and the U.S. Department of Justice (DOJ). Fresenius Medical

Care’s investigation and dialogue with the SEC and DOJ are

ongoing. Fresenius Medical Care has received a subpoena

from the SEC requesting additional documents and a request

from the DOJ for copies of the documents provided to the

SEC. Fresenius Medical Care is cooperating with the requests.

Conduct has been identified that may result in monetary

penalties or other sanctions under the FCPA or other anti-

bribery laws. In addition, Fresenius Medical Care’s ability to

conduct business in certain jurisdictions could be negatively

impacted. Fresenius Medical Care has previously recorded

a non-material accrual for an identified matter. Given the cur-

rent status of the investigation and remediation activities,

Fresenius Medical Care cannot reasonably estimate the range

of possible loss that may result from identified matters or

from the final outcome of the investigation or remediation

activities.

Fresenius Medical Care’s independent counsel, in conjunc-

tion with Fresenius Medical Care’s Compliance Department,

has reviewed Fresenius Medical Care’s anti-corruption com-

pliance program, including internal controls related to com-

pliance with international anti-bribery laws, and appropriate

enhancements are being implemented. Fresenius Medical

Care is fully committed to FCPA and other anti-bribery law

compliance.


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subpoenas “massachusetts and louisiana”

In December 2012, Fresenius Medical Care Holdings, Inc.

(FMCH) received a subpoena from the United States Attorney

for the District of Massachusetts requesting production of a

broad range of documents related to products manufactured

by FMCH, electron-beam sterilization of dialyzers and the

Liberty peritoneal dialysis cycler. FMCH has cooperated fully

in the government’s investigation. In December 2014, FMCH

was advised that the government’s investigation was precipi-

tated by a whistleblower, who first filed a complaint under seal

in June 2013. In September 2014, the government declined

to intervene in the whistleblower’s actions.

In January 2013, FMCH received a subpoena from the

United States Attorney for the Western District of Louisiana

requesting discovery responses relating to the Granuflo ® and

Naturalyte ® acid concentrate products that are also the sub-

ject of personal injury litigation described above. FMCH has

cooperated fully in the government’s investigation.

China anti-dumping investigation

On June 13, 2014, the Ministry of Commerce of the People’s

Republic of China (MOFCOM) launched an anti-dumping

investigation into producers of hemodialysis equipment in the

European Union and Japan, which includes certain of the

Fresenius Medical Care’s subsidiaries. On December 17, 2014,

the MOFCOM announced the termination of the investigation

after the complaint had been withdrawn by the petitioner.

subpoena “maryland”

In August 2014, Fresenius Medical Care Holdings, Inc. (FMCH)

received a subpoena from the United States Attorney for the

District of Maryland inquiring into FMCH’s contractual arrange-

ments with hospitals and physicians, including contracts

relating to the management of in-patient acute dialysis ser-

vices. FMCH is cooperating in the investigation.

subpoena “nevada”

In November 2014, Fresenius Kabi Oncology Limited (FKOL)

received a subpoena from the U.S. Department of Justice

(DOJ), U.S. Attorney for the District of Nevada. The subpoena

requests documents in connection with the January 2013

inspection by the U.S. Food and Drug Administration (FDA) of

FKOL’s plant for active pharmaceutical ingredients in Kaly-

ani, India. That inspection resulted in a warning letter from

the FDA in July 2013. The subpoena now begins the DOJ’s

criminal and / or civil investigation in this connection and

seeks information from throughout the Fresenius Kabi group.

Fresenius Kabi fully cooperates with the governmental

investigation.

From time to time, the Fresenius Group is a party to or may

be threatened with other litigation or arbitration, claims or

assessments arising in the ordinary course of its business.

Management regularly analyzes current information includ-

ing, as applicable, the Fresenius Group’s defenses and insur-

ance coverage and, as necessary, provides accruals for prob-

able liabilities for the eventual disposition of these matters.


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The Fresenius Group, like other health care providers, con-

ducts its operations under intense government regulation and

scrutiny. It must comply with regulations which relate to or

govern the safety and efficacy of medical products and sup-

plies, the marketing and distribution of such products, the

operation of manufacturing facilities, laboratories and dialysis

clinics, and environmental and occupational health and safety.

With respect to its development, manufacture, marketing

and distribution of medical products, if such compliance is not

maintained, the Fresenius Group could be subject to signif-

icant adverse regulatory actions by the U.S. Food and Drug

Administration (FDA) and comparable regulatory authorities

outside the United States. These regulatory actions could

include warning letters or other enforcement notices from the

FDA and / or comparable foreign regulatory authority, which

may require the Fresenius Group to expend significant time

and resources in order to implement appropriate corrective

actions. If the Fresenius Group does not address matters raised

in warning letters or other enforcement notices to the satis-

faction of the FDA and / or comparable regulatory authorities

outside the United States, these regulatory authorities could

take additional actions, including product recalls, injunctions

against the distribution of products or operation of manu-

facturing plants, civil penalties, seizures of Fresenius Group’s

products and / or criminal prosecution. FMCH is currently

engaged in remediation efforts with respect to three pending

FDA warning letters, Fresenius Kabi with respect to two

pending FDA warning letters. The Fresenius Group must also

comply with the laws of the United States, including the fed-

eral Anti-Kickback Statute, the federal False Claims Act, the

federal Stark Law and the federal Foreign Corrupt Practices

Act as well as other federal and state fraud and abuse laws.

Applicable laws or regulations may be amended, or enforce-

ment agencies or courts may make interpretations that differ

from Fresenius Group’s interpretations or the manner in

which it conducts its business. Enforcement has become a high

priority for the federal government and some states. In addi-

tion, the provisions of the False Claims Act authorizing pay-

ment of a portion of any recovery to the party bringing the

suit encourage private plaintiffs to commence whistleblower

actions. By virtue of this regulatory environment, Fresenius

Group’s business activities and practices are subject to exten-

sive review by regulatory authorities and private parties, and

continuing audits, subpoenas, other inquiries, claims and liti-

gation relating to Fresenius Group’s compliance with appli-

cable laws and regulations. The Fresenius Group may not

always be aware that an inquiry or action has begun, particu-

larly in the case of “whistleblower” actions, which are ini-

tially filed under court seal.


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The Fresenius Group operates many facilities throughout the

United States and other parts of the world. In such a decen-

tralized system, it is often difficult to maintain the desired level

of oversight and control over the thousands of indi viduals

employed by many affiliated companies. The Fresenius Group

relies upon its management structure, regulatory and legal

resources, and the effective operation of its compliance pro-

gram to direct, manage and monitor the activities of these

employees. On occasion, the Fresenius Group may identify

instances where employees or other agents deliberately, reck-

lessly or inadvertently contravene Fresenius Group’s poli-

cies or violate applicable law. The actions of such persons may

subject the Fresenius Group and its subsidiaries to liability

under the Anti-Kickback Statute, the Stark Law, the False

Claims Act and the Foreign Corrupt Practices Act, among other

laws and comparable laws of other countries.

Physicians, hospitals and other participants in the health

care industry are also subject to a large number of lawsuits

alleging professional negligence, malpractice, product lia-

bility, worker’s compensation or related claims, many of

which involve large claims and significant defense costs. The

Fresenius Group has been and is currently subject to these

suits due to the nature of its business and expects that those

types of lawsuits may continue. Although the Fresenius

Group maintains insurance at a level which it believes to be

prudent, it cannot assure that the coverage limits will be

adequate or that insurance will cover all asserted claims. A

successful claim against the Fresenius Group or any of its sub-

sidiaries in excess of insurance coverage could have a mate-

rial adverse effect upon it and the results of its operations. Any

claims, regardless of their merit or eventual outcome, could

have a material adverse effect on Fresenius Group’s reputation

and business.

The Fresenius Group has also had claims asserted against

it and has had lawsuits filed against it relating to alleged

patent infringements or businesses that it has acquired or

divested. These claims and suits relate both to operation of the

businesses and to the acquisition and divestiture transac-

tions. The Fresenius Group has, when appropriate, asserted

its own claims, and claims for indemnification. A successful

claim against the Fresenius Group or any of its subsidiaries

could have a material adverse effect upon its business, finan-

cial condition, and the results of its operations. Any claims,

regardless of their merit or eventual outcome, could have a

material adverse effect on Fresenius Group’s reputation and

business.


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29. FinanCial instrumentsThe relationship between classes and categories as well as the reconciliation to the statement

of financial position line items is shown in the following table:

Categories

loans and receivables

Financial liabilities measured at

amortized cost

Financial liabilities / assets measured at fair value

in the consolidated statement of income

available for sale financial assets relating to no category

Cla

sses

Cash and cash equivalents

▶ Cash and cash equivalents

assets recognized at carrying amount

▶ Trade accounts receiv-able (incl. receivables from and loans to related parties)

▶ Other non-current assets (loan to a dialysis provider)

assets recognized at fair value

▶ European government bonds (until 2013)

▶ Shares (until 2013)

▶ Shares in funds

liabilities recognized at carrying amount

▶ Trade accounts payable

▶ Short-term accounts pay-able to related parties

▶ Short-term debt (incl. short-term loans from related parties)

▶ Long-term debt excluding capital lease obligations

▶ Senior Notes

▶ Convertible bonds

▶ Long-term capital lease obligations

liabilities recognized at fair value

▶ Other long-term liabilities

noncontrolling interest subject to put provisions recognized at fair value

▶ Noncontrolling interest subject to put provisions

derivatives for hedging purposes

▶ Other current assets

▶ Other non-current assets

▶ Other short-term liabilities


▶ Other current assets

▶ Other non-current assets

▶ Other short-term liabilities



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ValuatiOn OF FinanCial instruments

The carrying amounts of financial instruments at December 31, classified into categories, were as follows:


Loans and receivables 4,419 3,622

Financial liabilities measured at amortized cost 16,360 13,597

Assets measured at fair value in the consolidated statement of income 1 166 16

Liabilities measured at fair value in the consolidated statement of income 1 198 25

Available for sale financial assets 148 197

Relating to no category 304 301

1 There are no financial instruments designated as at fair value through profit or loss upon initial recognition.

The following table presents the carrying amounts and fair values as well as the fair value hierarchy levels

of Fresenius Group’s financial instruments as of December 31, classified into classes:

2014 2013

€ in millionsFair value

hierarchy levelCarrying amount

Fair value Carrying amount

Fair value

Cash and cash equivalents 1 1,175 1,175 864 864

Assets recognized at carrying amount 3 4,419 4,420 3,622 3,629

Assets recognized at fair value 1 148 148 197 197

Liabilities recognized at carrying amount 2 16,511 17,356 13,691 14,225

Liabilities recognized at fair value 2 161 161 16 16

Noncontrolling interest subject to put provisions recognized at fair value 3 681 681 472 472

Derivatives for hedging purposes 2 90 90 10 10

The significant methods and assumptions used to estimate

the fair values of financial instruments as well as classification

of fair value measurements according to the three-tier fair

value hierarchy are as follows:

Cash and cash equivalents are stated at nominal value,

which equals the fair value.

The nominal value of short-term financial instruments such

as accounts receivable and payable and short-term debt

represents its carrying amount, which is a reasonable estimate

of the fair value due to the relatively short period to maturity

for these instruments.

The fair values of major long-term financial instruments

are calculated on the basis of market information. Financial

instruments for which market quotes are available are mea-

sured with the market quotes at the reporting date. The fair

values of the other long-term financial liabilities are calculated

at the present value of respective future cash flows. To deter-

mine these present values, the prevailing interest rates and

credit spreads for the Fresenius Group as of the date of the

statement of financial position are used.

The class assets recognized at carrying amount consists of

trade accounts receivable and a loan which Fresenius Medical

Care granted to a middle-market dialysis provider. The fair

value of the loan is based on significant unobservable inputs of

comparable instruments and thus the class is classified as

fair value hierarchy Level 3.

In 2013, the class assets recognized at fair value was com-

prised of European government bonds, shares and shares in

funds. In 2014, shares in funds are included in this class. The

fair values of these assets are calculated on the basis of mar-

ket information. The fair value of available for sale financial

assets quoted in an active market is based on price quota-

tions at the period-end date (Level 1). Therefore, this class is

classified as Level 1.

The class liabilities recognized at carrying amount is clas-

sified as hierarchy Level 2.

The derivatives embedded in the convertible bonds are

included in the class liabilities recognized at fair value. The

fair value of the embedded derivatives is calculated using


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the difference between the market value of the convertible

bond and the market value of an adequate straight bond dis-

counted with the market interest rates as of the reporting

date. The class was classified as Level 2.

The valuation of the class noncontrolling interest subject

to put provisions recognized at fair value is determined using

significant unobservable inputs. It is therefore classified as

Level 3.

Derivatives, mainly consisting of interest rate swaps and

foreign exchange forward contracts, are valued as follows:

The fair value of interest rate swaps is calculated by discount-

ing the future cash flows on the basis of the market interest

rates applicable for the remaining term of the contract as of

the date of the statement of financial position. To determine

the fair value of foreign exchange forward contracts, the con-

tracted forward rate is compared to the current forward rate

for the remaining term of the contract as of the date of the

statement of financial position. The result is then discounted

on the basis of the market interest rates prevailing at the

date of the statement of financial position for the respective

currency.

Fresenius Group’s own credit risk is incorporated in the

fair value estimation of derivatives that are liabilities. Counter-

party credit risk adjustments are factored into the valuation

of derivatives that are assets. The Fresenius Group monitors

and analyses the credit risk from derivative financial instru-

ments on a regular basis. For the valuation of derivative finan-

cial instruments, the credit risk is considered in the fair

value of every individual instrument. The basis for the default

probability are Credit Default Swap Spreads of each counter-

party appropriate for the duration. The calculation of the

credit risk considered in the valuation is done by multiplying

the default probability appropriate for the duration with

the expected discounted cash flows of the derivative financial

instrument.

The class of derivatives for hedging purposes includes the

call options which have been purchased to hedge the con-

vertible bonds. The fair values of these call options are derived

from market quotes. For the fair value measurement of the

class deriv atives for hedging purposes, significant other

observable inputs are used. Therefore, the class is classified

as Level 2 in accordance with the defined fair value hierarchy

levels.

Currently, there is no indication that a decrease in the

value of Fresenius Group’s financing receivables is probable.

Therefore, the allowances on credit losses of financing

receivables are immaterial.

FAIR VALUES OF DERIVATIVE FINANCIAL INSTRUMENTS

dec. 31, 2014 Dec. 31, 2013

€ in millions assets liabilities Assets Liabilities

Interest rate contracts (current) 0 0 0 4

Interest rate contracts (non-current) 1 6 0 4

Foreign exchange contracts (current) 9 43 15 5

Foreign exchange contracts (non-current) 0 – 1 –

derivatives designated as hedging instruments 1 10 49 16 13

Interest rate contracts (current) 0 0 0 –

Interest rate contracts (non-current) 0 1 0 1

Foreign exchange contracts (current) 1 21 37 15 8

Foreign exchange contracts (non-current) 1 – – 1 1

Derivatives embedded in the convertible bonds 0 145 0 0

Call options to secure the convertible bonds 1 145 0 0 0

derivatives not designated as hedging instruments 166 183 16 10

1 Derivatives designated as hedging instruments, foreign exchange contracts not designated as hedging instruments and call options to secure the convertible bonds are classified as derivatives for hedging purposes.


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Derivative financial instruments are marked to market each

reporting period, resulting in carrying amounts equal to fair

values at the reporting date.

Derivatives not designated as hedging instruments, which

are derivatives that do not qualify for hedge accounting, are

also solely entered into to hedge economic business transac-

tions and not for speculative purposes.

Derivatives for hedging purposes as well as the deriva-

tives embedded in the convertible bonds were recognized at

gross value within other assets in an amount of € 176 mil-

lion and other liabilities in an amount of € 231 million.

The current portion of interest rate contracts and foreign

exchange contracts indicated as assets in the preceding table

is recognized within other current assets in the consolidated

statement of financial position, while the current portion of

those indicated as liabilities is included in short-term accrued

expenses and other short-term liabilities. The non-current

portions indicated as assets or liabilities are recognized in

other non-current assets or in long-term accrued expenses

and other long-term liabilities, respectively. The derivatives

embedded in the convertible bonds and the call options to

secure the convertible bonds are recognized in other non-

current liabilities / assets in the consolidated statement of finan-

cial position.

effects of financial instruments recorded in the consolidated statement of incomeThe net gains and losses from financial instruments consisted

of allowances for doubtful accounts in an amount of € 241

million and foreign currency transactions of € 17 million. Inter-

est income of € 128 million resulted mainly from the valua-

tion of call options in connection with the convertible bonds,

trade accounts receivable and loans to related parties. Inter-

est expense of € 730 million resulted mainly from financial lia-

bilities, which are not recognized at fair value in the consoli-

dated statement of income.

EFFECT OF DERIVATIVES DESIGNATED AS HEDGING INSTRUMENTS ON THE

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2014

€ in millions

Gain or loss recognized in other comprehensive

income (loss) (effective portion)

Gain or loss reclassified from accumulated other comprehensive income

(loss) (effective portion)

Gain or loss recognized in the

consolidated statement of income

Interest rate contracts – 34 0

Foreign exchange contracts - 37 4 0

derivatives in cash flow hedging relationships 1 - 37 38 0

Foreign exchange contracts - 14

derivatives in fair value hedging relationships - 14

derivatives designated as hedging instruments - 37 38 - 14

1 The amount of gain or loss recognized in the consolidated statement of income solely relates to the ineffective portion.

2013

€ in millions

Gain or loss recognized in other comprehensive

income (loss) (effective portion)

Gain or loss reclassified from accumulated other comprehensive income

(loss) (effective portion)

Gain or loss recognized in the

consolidated statement of income

Interest rate contracts 21 32 3

Foreign exchange contracts - 16 - 2 –

derivatives in cash flow hedging relationships 1 5 30 3

Foreign exchange contracts –

derivatives in fair value hedging relationships –

derivatives designated as hedging instruments 5 30 3

1 The amount of gain or loss recognized in the consolidated statement of income solely relates to the ineffective portion.


Financial S

tatements

Gains from derivatives in fair value hedging relationships

and from foreign exchange contracts not designated as hedg-

ing instruments recognized in the consolidated statement of

income are faced by losses from the underlying transactions

in the corresponding amount.

The Fresenius Group expects to recognize a net amount of

€ 13 million of the existing losses for foreign exchange con-

tracts deferred in accumulated other comprehensive income

(loss) in the consolidated statement of income within the next

12 months. For interest rate contracts, the Fresenius Group

expects to recognize € 30 million of losses in the course of

normal business during the next 12 months in interest

expense.

Gains and losses from foreign exchange contracts and

the corresponding underlying transactions are accounted for

as cost of sales, selling, general and administrative expenses

and net interest. Gains and losses resulting from interest rate

contracts are recognized as net interest in the consolidated

statement of income.

In 2014, losses of € 16 million (2013: gains of € 34 million)

for available for sale financial assets were recognized in other

comprehensive income (loss).

EFFECT OF DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS

ON THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Gain or loss recognized in the consolidated statement of income


Interest rate contracts – 7

Foreign exchange contracts 56 31

derivatives not designated as hedging instruments 56 38

The following table shows when the cash flow from cash flow hedges is expected to occur.

CASH FLOW FROM CASH FLOW HEDGES

expected in period of

€ in millions 1 year 1 to 3 years 3 to 5 years over 5 years

Designated as hedging instrument 34 3 3 - 1

Not designated as hedging instrument 16 – – 1

market risk

generalThe Fresenius Group is exposed to effects related to foreign

exchange fluctuations in connection with its international

business activities that are denominated in various currencies.

In order to finance its business operations, the Fresenius

Group issues senior notes and commercial papers and enters

into mainly long-term credit agreements and euro notes

(Schuld scheindarlehen) with banks. Due to these financing

activities, the Fresenius Group is exposed to interest risk

caused by changes in variable interest rates and the risk of

changes in the fair value of statement of financial position

items bearing fixed interest rates.

In order to manage the risk of interest rate and foreign

exchange rate fluctuations, the Fresenius Group enters into

certain hedging transactions with highly rated financial

insti tutions as authorized by the Management Board. Deriva-

tive financial instruments are not entered into for trading

purposes.

In general, the Fresenius Group conducts its derivative

financial instrument activities under the control of a single cen-

tralized department. The Fresenius Group has established

guidelines derived from best practice standards in the banking

industry for risk assessment procedures and supervi sion

concerning the use of financial derivatives. These guidelines

require amongst other things a clear segregation of duties

in the areas of execution, administration, accounting and con-

trolling. Risk limits are continuously monitored and, where

appropriate, the use of hedging instruments is adjusted to that

extent.


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The Fresenius Group defines benchmarks for individual expo-

sures in order to quantify interest and foreign exchange

risks. The benchmarks are derived from achievable and sus-

tainable market rates. Depending on the individual bench-

marks, hedging strategies are determined and generally imple-

mented by means of micro hedges.

Earnings of the Fresenius Group were not materially

affected by hedge ineffectiveness in the reporting period since

the critical terms of the interest and foreign exchange deriv-

atives mainly matched the critical terms of the under lying

exposures.

derivative financial instrumentsClassification

To reduce the credit risk arising from derivatives, the

Fresenius Group concluded master netting agreements with

banks. Through such agreements, positive and negative fair

values of the derivative contracts could be offset against one

another if a partner becomes insolvent. This offsetting is

valid for transactions where the aggregate amount of obliga-

tions owed to and receivable from are not equal. If insolvency

occurs, the party which owes the larger amount is obliged

to pay the other party the difference between the amounts

owed in the form of one net payment.

Fresenius elects not to offset the fair values of derivative

financial instruments subject to master netting agreements in

the consolidated statement of financial position.

At December 31, 2014 and December 31, 2013, the

Fresenius Group had € 30 million and € 29 million of derivative

financial assets subject to netting arrangements and € 77 mil-

lion and € 22 million of derivative financial liabilities subject to

netting arrangements. Offsetting these derivative financial

instruments would have resulted in net assets of € 15 million

and € 22 million as well as net liabilities of € 62 million and

€ 15 million at December 31, 2014 and December 31, 2013,

respectively.

Foreign exchange risk management

The Fresenius Group has determined the euro as its financial

reporting currency. Therefore, foreign exchange translation

risks resulting from the fluctuation of exchange rates between

the euro and the local currencies, in which the financial

statements of the foreign subsidiaries are prepared, have an

impact on results of operations and financial positions reported

in the consolidated financial statements.

Besides translation risks, foreign exchange transaction

risks exist, which mainly relate to transactions such as pur-

chases and sales as well as projects and services provided by

the Fresenius Group which are denominated in foreign cur-

rencies. A major part of transaction risks arise from products

manufactured in Fresenius Group’s worldwide production

sites which are usually denominated in the local currency of

the respective manufacturer and are delivered worldwide

to various Fresenius Group entities. These intragroup sales

are mainly denominated in euros and U.S. dollars. Therefore,

Group companies are exposed to changes of the foreign

exchange rates between the invoicing currencies and the local

currencies in which they conduct their businesses. Solely for

the purpose of hedging existing and foreseeable foreign

exchange transaction exposures, the Fresenius Group enters

into foreign exchange forward contracts and, on a small

scale, foreign exchange options. To ensure that no foreign

exchange risks result from loans in foreign currencies, the

Fresenius Group enters into foreign exchange swap contracts.

As of December 31, 2014, the notional amounts of for-

eign exchange contracts totaled € 2,061 million. These foreign

exchange contracts have been entered into to hedge risks

from operational business and in connection with loans in for-

eign currency. The predominant part of the foreign exchange

forward contracts to hedge risks from operational business

was recognized as cash flow hedge, while foreign exchange

contracts in connection with loans in foreign currencies are

partly recognized as fair value hedges. The fair values of cash

flow hedges and fair value hedges were - € 34 million and € 54

thousand, respectively.

The hedge-effective portion of changes in the fair value of

foreign exchange forward contracts that are designated and

qualified as cash flow hedges of forecasted product purchases

and sales is reported in accumulated other comprehensive

income (loss). These amounts are subsequently reclassified

into earnings as a component of cost of sales or as selling,

general and administrative expenses in the same period in

which the hedged transaction affects earnings.

As of December 31, 2014, the Fresenius Group was party

to foreign exchange contracts with a maximum maturity of

17 months.


Financial S

tatements

The Fresenius Group uses a Cash-Flow-at-Risk (CFaR) model in

order to estimate and quantify such transaction risks from

foreign currencies. The basis for the analysis of the currency

risks are the foreign currency cash flows that are reasonably

expected to arise within the following 12 months, less any

hedges. Under the CFaR approach, the potential currency fluc-

tuations of these net exposures are shown as prob ability dis-

tributions based on historical volatilities and correlations of

the preceding 250 business days. The calculation is made

assuming a confidence level of 95% and a holding period of

up to one year. The aggregation of currency risks has risk-

mitigating effects due to correlations between the transactions

concerned, i. e. the overall portfolio’s risk exposure is gener-

ally less than the sum total of the underlying individual risks.

As of December 31, 2014, the Fresenius Group’s cash flow

at risk amounts to € 50 million, this means, with a probability

of 95%, a potential loss in relation to the forecasted foreign

exchange cash flows of the next 12 months will be not higher

than € 50 million.

The following table shows the net positions in foreign

currencies at December 31, 2014 which have a significant

influence on Fresenius Group’s foreign currency risk.

Nominal € in millions 2014

Hong Kong dollar - 147.9

U.S. dollar 137.5

Swedish krona - 124.8

Chinese renminbi 110.9

Russian ruble 67.1

interest rate risk management

Fresenius Group’s interest rate risks mainly arise from money

market and capital market transactions of the Group for

financing its business activities.

The Fresenius Group enters into interest rate swaps and,

on a small scale, into interest rate options in order to protect

against the risk of rising interest rates. These interest rate

derivatives are mainly designated as cash flow hedges and

have been entered into in order to convert payments based on

variable interest rates into payments at a fixed interest rate

and in anticipation of future debt issuances (pre-hedges). The

U.S. dollar interest rate swaps with a notional volume of

US$ 100 million (€ 82 million) and a fair value of US$ 1 million

(€ 1 million) expire in 2022. The euro interest rate swaps

have a notional volume of € 608 million and a fair value of

- € 7 million. These include interest rate swaps of € 294 million

which became effective in January 2015. The euro interest

rate swaps expire in the years 2016 to 2022. The U.S. dollar

interest rate swaps bear an average interest rate of 2.142%

and the euro interest rate swaps bear an average interest rate

of 0.678%.

The pre-hedges are used to hedge interest rate exposures

with regard to interest rates which are relevant for the future

debt issuance and which could rise until the debt is actually

issued. These pre-hedges are settled at the issuance date of the

corresponding debt with the settlement amount recorded in

accumulated other comprehensive income (loss) amortized to

interest expense over the life of the pre-hedges. At Decem-

ber 31, 2014 and December 31, 2013, the Fresenius Group had

€ 89 million and € 113 million, respectively, related to such

settlements of pre-hedges deferred in accumulated other com-

prehensive income (loss), net of tax.

Interest payables and interest receivables in connection

with the swap agreements are accrued and recorded as an

adjustment to the interest expense at each reporting date. Con-

cerning interest rate contracts, unscheduled repayments or

the renegotiation of hedged items may in some cases lead to

the de-designation of the hedging instrument, which existed

up to that point. From that date, the respective hedging

transactions are recognized in the consolidated statement of

income.

For purposes of analyzing the impact of changes in the rel-

evant reference interest rates on Fresenius Group’s results of

operations, the Group calculates the portion of financial debt

which bears variable interest rates and which has not been

hedged by means of interest rate swaps or options against ris-

ing interest rates. For this particular part of its liabilities, the

Fresenius Group assumes an increase in the reference rates

of 0.5% compared to the actual rates as of the date of the

statement of financial position. The corresponding additional

annual interest expense is then compared to the net income

attributable to shareholders of Fresenius SE & Co. KGaA. This

analysis shows that an increase of 0.5% in the relevant

ref erence rates would have an effect of less than 1.5% on the

consolidated net income attributable to shareholders of

Fresenius SE & Co. KGaA and Fresenius SE & Co. KGaA share-

holders’ equity.


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Credit risk

The Fresenius Group is exposed to potential losses regarding

financial instruments in the event of non-performance by

counterparties. With respect to derivative financial instruments,

it is not expected that any counterparty fails to meet its obli-

gations as the counterparties are highly rated financial institu-

tions. The maximum credit exposure of deri v atives is repre-

sented by the fair value of those contracts with a positive fair

value amounting to € 30 million for foreign exchange deriv-

atives and € 1 million for interest rate derivatives at Decem-

ber 31, 2014. The maximum credit risk resulting from the

use of non-derivative financial instruments is defined as the

total amount of all receivables. In order to control this credit

risk, the Management of the Fresenius Group performs an

aging analysis of trade accounts receivable. For details on the

aging analysis and on the allowance for doubtful accounts,

please see note 14, Trade accounts receivable.

liQuidity risk

The liquidity risk is defined as the risk that a company is

potentially unable to meet its financial obligations. The Man-

agement of the Fresenius Group manages the liquidity of

the Group by means of effective working capital and cash man-

agement as well as an anticipatory evaluation of refinanc-

ing alternatives. The Management of the Fresenius Group

believes that existing credit facilities as well as the cash gener-

ated by operating activities and additional short-term bor-

rowings are sufficient to meet the Company’s foreseeable

demand for liquidity (see note 21, Debt and capital lease obli-

gations).

The following table shows the future undiscounted con-

tractual cash flows (including interests) resulting from recog-

nized financial liabilities as well as the fair value of noncon-

trolling interest subject to put provisions and the fair value of

derivative financial instruments:

€ in millions up to 1 year 1 to 3 years 3 to 5 years more than 5 years

Long-term debt and capital lease obligations (including accounts receivable securitization program) 1 874 1,818 3,183 1,361

Short-term debt 234 0 0 0

Senior Notes 1,088 1,427 2,968 4,181

Convertible bonds 4 9 509 402

Trade accounts payable 1,052 0 0 0

Noncontrolling interest subject to put provisions 285 161 153 82

Derivative financial instruments – designated as cash flow hedge 43 3 3 0

Derivative financial instruments – designated as fair value hedge – 0 0 0

Derivative financial instruments – not designated as hedging instruments 36 33 113 1

total 3,616 3,451 6,929 6,027

1 Future interest payments for financial liabilities with variable interest rates were calculated using the latest interest rates fixed prior to December 31, 2014.

30. supplementary inFOrmatiOn On Capital managementThe Fresenius Group has a solid financial profile. Capital

management includes both equity and debt. A principal objec-

tive of Fresenius Group’s capital management is to optimize

the weighted-average cost of capital. Further, it is sought to

achieve a balanced mix of equity and debt. To secure growth

on a long-term basis, a capital increase may also be con-

sidered in exceptional cases, for instance to finance a major

acquisition.

Due to the Company’s diversification within the health care

sector and the strong market positions of the business seg-

ments in global, growing and non-cyclical markets, predict-

able and sustainable cash flows are generated. They allow

a reasonable proportion of debt, i. e. the employment of an

extensive mix of financial instruments. Moreover, Fresenius

Group’s customers are generally of high credit quality.


Financial S

tatements

Shareholders’ equity and debt have developed as follows:

SHAREHOLDERS’ EqUITy


Shareholders’ equity 15,483 13,260

Total assets 39,897 32,758

Equity ratio 38.8% 40.5%

Fresenius SE & Co. KGaA is not subject to any capital require-

ments provided for in its articles of association. Fresenius SE &

Co. KGaA has obligations to issue shares out of the Condi-

tional Capital relating to the exercise of stock options and con-

vertible bonds on the basis of the existing 2003, 2008 and

2013 stock option plans (see note 33, Stock options).

DEBT


Debt 15,454 12,804

Total assets 39,897 32,758

Debt ratio 38.7% 39.1%

Assuring financial flexibility is the top priority in the Group’s

financing strategy. This flexibility is achieved through a wide

range of financing instruments and a high degree of diver-

sification of the investors. Fresenius Group’s maturity profile

displays a broad spread of maturities with a high proportion

of medium- and long-term financing. In the choice of financ-

ing instruments, market capacity, investor diversi fication,

flexibility, credit conditions and the existing maturity profile

are taken into account.

The leverage ratio on the basis of net debt / EBITDA is a key

financial figure for the Fresenius Group. As of December 31,

2014, the leverage ratio (pro forma, before special items)

was 3.4.

Fresenius Group’s financing strategy is reflected in its

credit ratings. The Fresenius Group is covered by the rating

agencies Moody’s, Standard & Poor’s and Fitch.

The following table shows the company rating of

Fresenius SE & Co. KGaA:

RATING OF FRESENIUS SE & CO. KGAA

Feb. 24, 2015 Dec. 31, 2014 Dec. 31, 2013

Standard & Poor’s

Corporate Credit Rating bbb - BB + BB +

Outlook stable positive positive

Moody’s

Corporate Credit Rating ba1 Ba1 Ba1

Outlook stable negative negative

Fitch

Corporate Credit Rating bb + BB + BB +

Outlook positive positive watch

evolving

In January 2015, both Moody’s and Standard & Poor’s have

adjusted their view on Fresenius’ rating. On January 12,

2015, Moody’s raised the outlook from negative to stable. On

January 16, 2015, Standard & Poor’s have upgraded the

credit rating from BB + to BBB - with a stable outlook.

31. supplementary inFOrmatiOn On the COnsOlidated statement OF Cash FlOWsThe consolidated statements of cash flows of the Fresenius

Group for the fiscal years 2014 and 2013 are shown on

page 95.

Cash funds reported in the consolidated statement of cash

flows and in the consolidated statement of financial position

are comprised of cash on hand, checks, securities and cash at

bank which are readily convertible within three months and

are subject to insignificant risk of changes in value.

The following table provides additional information with

regard to the consolidated statement of cash flows:


Interest paid 567 563

Income taxes paid 781 648


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The business segments were identified in accordance with

FASB ASC Topic 280, Segment Reporting which defines the

segment reporting requirements in the annual financial state-

ments and interim reports with regard to the operating busi-

ness, product and service businesses and regions. The busi-

ness segments of the Fresenius Group are as follows:

▶ Fresenius Medical Care

▶ Fresenius Kabi

▶ Fresenius Helios

▶ Fresenius Vamed

▶ Corporate / Other

The segment Corporate / Other is mainly comprised of the hold-

ing functions of Fresenius SE & Co. KGaA as well as Fresenius

Netcare GmbH, which provides services in the field of infor-

mation technology and, until June 28, 2013, Fresenius Biotech,

which did not fulfill the characteristics of a reportable seg-

ment. In addition, the segment Corporate / Other includes inter-

segment consolidation adjustments as well as special items

(see note 3, Special items).

Details on the business segments are shown on page 101

of the notes.

Segment reporting by region takes account of geographi-

cal factors and the similarity of markets in terms of opportu-

nities and risks. The allocation to a particular region is based

on the domicile of the customers.

nOtes On the business segments

The key figures used by the Management Board to assess

segment performance, have been selected in such a way that

they include all items of income and expenses which fall

under the area of responsibility of the business segments. The

Cash paid for acquisitions (without investments in licenses)

consisted of the following:


Assets acquired 3,728 2,781

Liabilities assumed - 938 - 67

Noncontrolling interest - 331 - 73

Notes assumed in connection with acquisitions - 238 - 60

Cash paid 2,221 2,581

Cash acquired - 232 - 34

Cash paid for acquisitions, net 1,989 2,547

Cash paid for investments, net of cash acquired 207 147

Cash paid for intangible assets, net 18 9

total cash paid for acquisitions and investments, net of cash acquired, and net purchases of intangible assets 2,214 2,703

Proceeds from the sale of subsidiaries were € 18 million in

2014 (2013: € 109 million).

32. nOtes On the COnsOlidated segment repOrting

general

The consolidated segment reporting tables shown on pages

98 to 99 of this Annual Report are an integral part of the notes.

The Fresenius Group has identified the business segments

Fresenius Medical Care, Fresenius Kabi, Fresenius Helios

and Fresenius Vamed, which corresponds to the internal orga-

nizational and reporting structures (Management Approach)

at December 31, 2014.

The key data disclosed in conjunction with the consoli-

dated segment reporting correspond to the key data of the

internal reporting system of the Fresenius Group. Internal

and external reporting and accounting correspond to each

other; the same key data and definitions are used.

Sales and proceeds between the segments are indicative

of the actual sales and proceeds agreed with third parties.

Administrative services are billed in accordance with service

level agreements.


Financial S

tatements

Management Board is convinced that the most suitable per-

form ance indicator is the operating income (EBIT). The Man-

agement Board believes that, in addition to the operating

income, the figure for earnings before interest, taxes and

depreciation / amortization (EBITDA) can also help investors to

assess the ability of the Fresenius Group to generate cash

flows and to meet its financial obligations. The EBITDA figure

is also the basis for assessing Fresenius Group’s compliance

with the terms of its credit agreements (e. g. the Fresenius

Medical Care 2012 Credit Agreement or the 2013 Senior Credit

Agreement).

Depreciation and amortization is presented for property,

plant and equipment and intangible assets with definite useful

lives of the respective business segment.

Net interest is comprised of interest expenses and inter-

est income.

Net income attributable to shareholders of Fresenius SE &

Co. KGaA is defined as earnings after income taxes and non-

controlling interest.

The operating cash flow is the cash provided by / used in

operating activities.

The cash flow before acquisitions and dividends is the

operating cash flow less net capital expenditure.

Debt is comprised of bank loans, senior notes, convertible

bonds, capital lease obligations, liabilities relating to outstand-

ing acquisitions as well as intercompany liabilities.

Capital expenditure mainly includes additions to property,

plant and equipment.

Acquisitions refer to the purchase of shares in legally

inde pendent companies and the acquisition of business divi-

sions and intangible assets (e. g. licenses). The key figures

shown with regard to acquisitions present the contractual pur-

chase prices comprising amounts paid in cash (less cash

acquired), debts assumed and the issuance of shares, whereas

for the purposes of the statement of cash flows, only cash

purchase price components less acquired cash and cash equiv-

alents are reported.

The EBITDA margin is calculated as a ratio of EBITDA

to sales.

The EBIT margin is calculated as a ratio of EBIT to sales.

The return on operating assets (ROOA) is defined as the

ratio of EBIT to average operating assets. Operating assets are

defined as total assets less deferred tax assets, trade accounts

payable and advance payments from customers as well as

guaranteed subsidies.

In addition, the key indicators “Depreciation and amortiza-

tion in % of sales” and “Operating cash flow in % of sales”

are also disclosed.

RECONCILIATION OF KEy FIGURES TO

CONSOLIDATED EARNINGS


Total EBIT of reporting segments 3,182 3,070

General corporate expenses Corporate / Other (EBIT) - 68 - 79

group ebit 3,114 2,991

Interest expenses - 730 - 634

Interest income 128 50

income before income taxes 2,512 2,407

RECONCILIATION OF NET DEBT WITH THE CONSOLIDATED

STATEMENT OF FINANCIAL POSITION


Short-term debt 230 959

Short-term loans from related parties 3 6

Current portion of long-term debt and capital lease obligations 753 855

Current portion of Senior Notes 682 0

Long-term debt and capital lease obligations, less current portion 5,977 5,871

Senior Notes, less current portion 6,977 5,113

Convertible bonds 832 0

debt 15,454 12,804

less cash and cash equivalents 1,175 864

net debt 14,279 11,940


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The following table shows the non-current assets by geo-

graphical region:


Germany 7,865 6,893

Europe (excluding Germany) 2,904 2,879

North America 16,524 13,174

Asia-Pacific 1,476 1,220

Latin America 586 372

Africa 47 42

total non-current assets 1 29,402 24,580

1 The aggregate amount of net non-current assets is the sum of non-current assets less deferred tax assets and less derivative financial instruments.

In 2014, the Fresenius Group generated sales of € 6,292 mil-

lion (2013: € 4,403 million) in Germany. Sales in the United

States were € 9,107 million at actual rates and € 9,110 million

in constant currency in 2014 (2013: € 8,414 million).

33. stOCk OptiOns

COmpensatiOn COst in COnneCtiOn With the

stOCk OptiOn plans OF the Fresenius grOup

In 2014, the Fresenius Group recognized compensation cost in

an amount of € 23 million for stock options granted since

2011. For stock incentive plans which are performance-based,

the Fresenius Group recognizes compensation cost over the

vesting periods, based on the market values of the underlying

stock at the grant date.

Fair Value OF stOCk OptiOns

The Fresenius Group elected to adopt FAS 123(R), Share-

Based Payment, prospectively.

The Fresenius Group uses a binomial option pricing

model in determining the fair value of stock options granted

under the stock option plans of Fresenius SE & Co. KGaA

and Fresenius Medical Care AG & Co. KGaA. Option valuation

models require the input of highly subjective assumptions

including expected stock price volatility. Fresenius Group’s

assumptions are based upon its past experiences, market

trends and the experiences of other entities of the same size

and in similar industries. To incorporate the effects of

expected early exercise in the model, an early exercise of

vested options was assumed as soon as the share price

exceeds 150% of the exercise price. Fresenius Group’s stock

options have characteristics that vary significantly from

traded options and changes in subjective assumptions can

materially affect the fair value of the option.

The weighted-average assumptions for the calculation of

the fair value of grants of the Fresenius SE & Co. KGaA Stock

Option Plan 2013 made during 2014 and 2013 are as follows:

2014 2013

€ in millionsJuly

grantDecember

GrantJuly

Grant

Expected dividend yield 1.47% 1.50% 1.47%

Risk-free interest rate 0.85% 1.41% 1.33%

Expected volatility 26.83% 27.43% 27.75%

Life of options 8 years 8 years 8 years

Exercise price per option in € 36.92 33.10 32.12

The expected volatility results from the historical volatility cal-

culated over the expected life of options. The volatility was

determined when the fair value of stock options was calculated

for the first time and since then has been controlled every

year upon issuance of a new tranche.

Fresenius se & CO. kgaa stOCk OptiOn plans

description of the Fresenius se & Co. kgaa stock option plans in placeAs of December 31, 2014, Fresenius SE & Co. KGaA had three

stock option plans in place: the Fresenius AG Stock Option

Plan 2003 (2003 Plan) which is based on convertible bonds,

the stock option based Fresenius SE Stock Option Plan 2008

(2008 Plan) and the Fresenius SE & Co. KGaA Long Term

Incentive Program 2013 (2013 LTIP) which is based on stock

options and phantom stocks. In 2014, stock options were

solely granted under the 2013 LTIP.


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tatements

2013 ltip

The 2013 LTIP is comprised of the Fresenius SE & Co. KGaA

Stock Option Plan 2013 (2013 SOP) and the Fresenius SE &

Co. KGaA Phantom Stock Plan 2013 (2013 PSP). It combines

the granting of stock options with the granting of phantom

stock awards which entitle the holder to receive cash payments

upon exercising the phantom stock. Each of the 2013 SOP

and 2013 PSP making up the 2013 LTIP have been established

under a stand-alone legal documentation.

2013 sOp

Under the 2013 SOP, which was approved by the Annual

General Meeting of Fresenius SE & Co. KGaA on May 17, 2013,

Fresenius Management SE is authorized to issue up to 8.4

million subscription rights for an amount of 8.4 million non-par

value ordinary bearer shares of Fresenius SE & Co. KGaA

until May 16, 2018.

Of the up to 8.4 million options, up to 1.6 million options

are designated for members of the Management Board of

Fresenius Management SE; up to 4.4 million options are des-

ignated for members of the management of directly or indi-

rectly affiliated companies (except for Fresenius Medical Care)

and up to 2.4 million options are designated for executive

employees of Fresenius SE & Co. KGaA and its affiliated com-

panies (except for Fresenius Medical Care).

The granting of the options shall occur in five annual

tranches, each to the last Monday in July or the first Monday

in December. With respect to new options, the Supervisory

Board of Fresenius Management SE determines the stock

options granted to members of Fresenius Management SE’s

Management Board, whereas the Management Board of

Fresenius Management SE determines the other participants

in the 2013 SOP and the stock options granted to them.

The exercise price of an option shall equal the volume-

weighted average stock market price (closing price) of the non-

par value ordinary bearer share of Fresenius SE & Co. KGaA

in the electronic Xetra trading of Deutsche Börse AG in Frank-

furt am Main, or a comparable successor system, on the last

30 calendar days prior to the respective grant date.

Options granted have an eight-year term but can be exercised

only after a four-year vesting period. The exercise of options

is subject to the condition precedent, in each case, that the

annual success target within a four-year waiting period is

achieved. The success target is achieved in each case if, after

the granting of the options to the respective entitled person,

either (i) the consolidated net income attributable to share-

holders of Fresenius SE & Co. KGaA according to U.S. GAAP,

adjusted for extraordinary effects and on a constant currency

basis, has increased by at least 8% per annum in comparison

to the previous year in each case within the waiting period,

or (ii) – if this is not the case – the compounded annual growth

rate of the consolidated net income attributable to share-

holders of Fresenius SE & Co. KGaA according to U.S. GAAP,

adjusted for extraordinary effects and on a constant currency

basis, during the four years of the waiting period amounts

to at least 8%. In the event that the success target within the

four-year waiting period is not achieved for the individual

years or for the compounded annual growth rate, the options

issued in each case are forfeited in proportion to the non-

achievement of the success target within the waiting period,

i. e. by one quarter, two quarters, three quarters, or com-

pletely. The performance targets for 2013 and 2014 were met.

The adjusted net income attributable to shareholders of

Fresenius SE & Co. KGaA according to U.S. GAAP (currency

adjusted) and changes thereto compared to the adjusted

net income according to U.S. GAAP (without currency adjust-

ment) of the relevant comparison year shall be verified with

binding effect in each case by the auditors of Fresenius SE &

Co. KGaA on the basis of the audited consolidated financial

statements. Upon exercise of vested options, Fresenius SE &

Co. KGaA has the right to grant treasury shares in lieu of

increasing capital by the issuance of new shares.

After the expiration of the waiting period, all options in

respect of which the success target has been achieved

may be exercised at any time outside the designated black-

out periods.


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2013 psp

Fresenius SE & Co. KGaA’s 2013 PSP was established in May

2013, together with the 2013 SOP. Awards of phantom stock

can be granted on each stock option grant date. Phantom stock

awarded under the 2013 PSP may be granted to the mem-

bers of Fresenius Management SE’s Management Board, the

members of the management of directly or indirectly affili-

ated companies (except for Fresenius Medical Care) and for

executive employees of Fresenius SE & Co. KGaA and its affili-

ated companies (except for Fresenius Medical Care).

As under the 2013 SOP, the Supervisory Board of Fresenius

Management SE determines the phantom stock granted to

members of Fresenius Management SE’s Management Board,

whereas the Management Board of Fresenius Management SE

determines the other participants in the 2013 PSP and the

phantom stock granted to them.

Phantom stock awards under the 2013 PSP entitle the

holder to receive a cash payment. Each phantom stock award

shall entitle the holder to receive the volume-weighted aver-

age stock market price (closing price) of the non-par value

ordinary bearer share of Fresenius SE & Co. KGaA in the elec-

tronic Xetra trading of Deutsche Börse AG in Frankfurt am

Main, or a comparable successor system, during the last three

months prior to the date the phantom stock is exercised.

The exercise of phantom stock is subject to the condition

precedent, in each case, that the annual success target within

a four-year waiting period is achieved. The success target is

achieved in each case if, after the granting of the subscription

rights to the respective entitled person, either (i) the consoli-

dated net income attributable to shareholders of Fresenius SE &

Co. KGaA according to U.S. GAAP, adjusted for extraordinary

effects and on a constant currency basis, has increased by at

least 8% per annum in comparison to the previous year in

each case within the waiting period, or (ii) – if this is not the

case – the compounded annual growth rate of the consolidated

net income attributable to shareholders of Fresenius SE &

Co. KGaA according to U.S. GAAP, adjusted for extraordinary

effects and on a constant currency basis, during the four

years of the waiting period amounts to at least 8%. In the event

that the success target within the four-year waiting period

is not achieved for the individual years or for the compounded

annual growth rate, the phantom stock awards issued in each

case are forfeited in proportion to the non-achievement of the

success target within the waiting-period, i. e. by one quarter,

two quarters, three quarters, or completely. The performance

targets for 2013 and 2014 were met.

The adjusted net income attributable to shareholders of

Fresenius SE & Co. KGaA according to U.S. GAAP (currency

adjusted) and changes thereto compared to the adjusted net

income according to U.S. GAAP (without currency adjust-

ment) of the relevant comparison year shall be verified with

binding effect in each case by the auditors of Fresenius SE &

Co. KGaA on the basis of the audited consolidated financial

statements.

After the expiration of the waiting period, all exercisable

phantom stock will be deemed to be exercised and cashed

out on March 1 following the end of the waiting period (or the

following banking day).

stock Option plan 2008

During 2008, Fresenius SE adopted the 2008 Plan to grant

subscription rights to members of the Management Board and

executive employees of the Company and affiliated compa-

nies. Under the 2008 Plan, up to 6.2 million options could be

issued, which carried the entitlement to exclusively obtain

6.2 million ordinary shares. The options granted have a seven-

year term but can be exercised only after a three-year vest-

ing period. The vesting of options granted is mandatorily sub-

ject to the condition, in each case, that the annual success

target within the three-year vesting period is achieved. For

each such year, the success target is achieved if the consoli-

dated net income attributable to shareholders of Fresenius SE &

Co. KGaA, adjusted for extraordinary effects, has increased

by at least 8% compared to the respective adjusted net income

attrib utable to shareholders of Fresenius SE & Co. KGaA of

the previous fiscal year. For each year in which the success

target has not been met, one-third of the options granted

shall forfeit. The adjusted net income attributable to share-

holders of Fresenius SE & Co. KGaA shall be calculated on the

basis of the calculation method of the accounting principles

according to U.S. GAAP. For the purposes of the 2008 Plan,


Financial S

tatements

the adjusted net income attributable to shareholders of

Fresenius SE & Co. KGaA is determined and will be verified

with binding effect by Fresenius SE & Co. KGaA’s auditor

during the audit of the consolidated financial statements. The

performance targets were met in all years. If all conditions

are fulfilled, stock options may be exercised throughout the

year with the exception of certain pre-determined black-

out periods.

This stock incentive plan was replaced by the 2013 SOP.

The last options were granted in 2012.


During 2003, Fresenius AG adopted the 2003 Plan for mem-

bers of the Management Board and executive employees. This

incentive plan which is based on convertible bonds was

replaced by the 2008 Plan and no convertible bonds have been

granted since 2008. Under the 2003 Plan, eligible employees

have the right to acquire ordinary shares of Fresenius SE &

Co. KGaA. The bonds expire in 10 years and one third of them

can be exercised beginning after two, three and four years

after the grant date, respectively. Upon issuance of the option,

the employees had the right to choose options with or with-

out a stock price target. In the case of options not subject to a

stock price target, the number of convertible bonds awarded

to the eligible employee was 15% less than if the employee

elected options subject to the stock price target.

Changes of the stock option plans due to the capital increase from company’s funds (stock split 2014 at a ratio of 1 : 3)Compared to the existing conditions described, the follow-

ing material changes to the stock option plans result from the

stock split 2014 at a ratio of 1 : 3 coming into effect:

2013 sOp

As far as options have not yet been granted under the 2013

SOP, the total volume of not yet granted subscription rights

increases in the same proportion as the subscribed capital

(factor 3). The same applies to the subsets of the subscription

rights that are attributable to individual groups of partici-

pants. For stock options that were granted before the stock

split 2014 came into effect, the entitlement of the participants

to receive new shares through the exercise of stock options


(factor 3). The participants are now entitled to receive three

bearer ordinary shares of Fresenius SE & Co. KGaA. The exer-

cise price is reduced proportionally.

2013 psp

The holders of phantom stocks, that were issued before the

stock split 2014 came into effect, will be granted an economic

compensation through retroactively tripling the number of

phantom stocks granted before the stock split 2014 came into

effect.


For stock options that were granted before the stock split

2014 came into effect, the entitlement of the participants to

receive new shares through the exercise of stock options


(factor 3). The participants are now entitled to receive three

bearer ordinary shares of Fresenius SE & Co. KGaA. The

maximum number of ordinary shares to be issued increases

accordingly. The exercise price is reduced proportionally.


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Convertible bonds granted prior to the registration of the

resolutions of the Annual General Meeting dated December 4,

2006 with the commercial register regarding the capital

increase from company’s funds and the new division of the

subscribed capital (stock split 2006) but converted after the

stock split 2014 came into effect, now entitle participants to

receive nine bearer ordinary shares of Fresenius SE & Co.

KGaA per convertible bond. The maximum number of ordinary

shares to be issued increases accordingly. The conversion

price is reduced proportionally.

Convertible bonds granted after the registration of the stock

split 2006 with the commercial register but converted after

the stock split 2014 came into effect, now entitle participants

to receive three bearer ordinary shares of Fresenius SE &

Co. KGaA per convertible bond. The maximum number of ordi-

nary shares to be issued increases accordingly. The conver-

sion price is reduced proportionally.

transactions during 2014In 2014, Fresenius SE & Co. KGaA awarded 2,233,812 stock

options under the 2013 LTIP, including 315,000 options to

members of the Management Board of Fresenius Manage-

ment SE, at an exercise price of € 36.92, a fair value of € 8.28

each and a total fair value of € 18.5 million, which will be

amortized over the four-year vesting period. Fresenius SE &

Co. KGaA also awarded 326,592 phantom stocks under the

2013 LTIP, including 81,606 phantom stocks granted to mem-

bers of the Management Board of Fresenius Management SE,

at a measurement date (December 31, 2014) fair value of

€ 41.11 each and a total fair value of € 13.4 million, which will

be revalued if the fair value changes, and amortized over the

four-year vesting period.

During the fiscal year 2014, Fresenius SE & Co. KGaA received

cash of € 45 million from the exercise of 2,448,113 stock

options. The average stock price of the ordinary share at the

exercise date was € 37.82. The intrinsic value of convertible

bonds and stock options exercised in 2014 was € 45 million.

1,048,413 convertible bonds were outstanding and exer-

cisable under the 2003 Plan at December 31, 2014. The mem-

bers of the Fresenius Management SE Management Board

held 137,724 convertible bonds. At December 31, 2014, out of

7,594,726 outstanding stock options issued under the 2008

Plan, 4,276,591 were exercisable and 1,578,180 were held by

the members of the Fresenius Management SE Management

Board. 4,260,627 stock options issued under the 2013 LTIP

were outstanding at December 31, 2014. The members of the

Fresenius Management SE Management Board held 630,000

stock options. 644,679 phantom stocks issued under the

2013 LTIP were outstanding at December 31, 2014. The mem-

bers of the Fresenius Management SE Management Board

held 163,422 phantom stocks.

Stock option transactions are summarized as follows:

Ordinary shares Dec. 31

Number of options

Weighted- average

exercise price in €

Number of options

exercisable

balance 2012 16,154,256 19.57 6,183,987

Granted 2,160,618 32.26

Exercised 4,519,707 15.16

Forfeited 305,664 21.91

balance 2013 13,489,503 23.06 4,657,380

Granted 2,233,812 36.92

Exercised 2,448,113 18.29

Forfeited 371,436 27.42

balance 2014 12,903,766 26.27 5,325,004


Financial S

tatements

The following table provides a summary of fully vested options outstanding and exercisable for ordinary shares

at December 31, 2014:

OPTIONS FOR ORDINARy SHARES

Options outstanding Options exercisable

Range of exercise price in € Number of options

Weighted-average remaining

contractual life in years

Weighted-average exercise price

in € Number of options




in €

5.01 – 10.00 97,407 0.50 9.83 97,407 0.50 9.83

10.01 – 15.00 716,360 1.45 12.14 716,360 1.45 12.14

15.01 – 20.00 2,249,066 2.29 18.22 2,249,066 2.29 18.22

20.01 – 25.00 2,262,171 3.48 23.73 2,262,171 3.48 23.73

25.01 – 30.00 3,318,135 4.51 26.18 0

30.01 – 35.00 2,032,815 6.63 32.27 0

35.01 – 40.00 2,227,812 7.58 36.92 0

12,903,766 4.61 26.27 5,325,004 2.65 19.59

At December 31, 2014, the aggregate intrinsic value of exer-

cisable options for ordinary shares was € 126 million.

At December 31, 2014, total unrecognized compensation

cost related to non-vested options granted under the 2008

Plan and the 2013 LTIP was € 30 million. This cost is expected

to be recognized over a weighted-average period of 2.8 years.

Fresenius mediCal Care ag & CO. kgaa

stOCk OptiOn plans

Fresenius medical Care ag & Co. kgaa long term incentive program 2011On May 12, 2011, the Fresenius Medical Care AG & Co. KGaA

Stock Option Plan 2011 (2011 SOP) was established by reso-

lution of Fresenius Medical Care AG & Co. KGaA’s (FMC-AG &

Co. KGaA) Annual General Meeting (AGM). The 2011 SOP,

together with the Phantom Stock Plan 2011, which was estab-

lished by resolution of Fresenius Medical Care Management

AG’s (FMC Management AG) Management and Supervisory

Boards, forms FMC-AG & Co. KGaA’s Long Term Incentive Pro-

gram 2011 (2011 Incentive Program). Under the 2011 Incen-

tive Program, participants may be granted awards, which will

consist of a combination of stock options and phantom stock.

Awards under the 2011 Incentive Program will be granted

over a five-year period and can be granted on the last Monday

in July and / or the first Monday in December each year. Gener-

ally, and prior to the respective grant, the participants will

be able to choose how much of the granted value is granted in

the form of stock options and phantom stock in a predefined

range of 75 : 25 to 50 : 50, stock options vs. phantom stock. For

grants made in the year 2014 and for participants not belong-

ing to FMC Management AG’s Management Board, the grant

ratio was predefined at 50 : 50. The number of phantom shares

that plan participants may choose to receive instead of stock

options within the aforementioned predefined range is deter-

mined on the basis of a fair value assessment pursuant to a

binomial model. With respect to grants made in July, this fair

value assessment will be conducted on the day following

FMC-AG & Co. KGaA’s AGM and with respect to the grants made

in December, on the first Monday in October. The awards

under the 2011 Incentive Program are subject to a four-year

vesting period. The vesting of the awards granted is subject

to achievement of performance targets. The 2011 Incentive

Program was established with a conditional capital increase

up to € 12 million subject to the issue of up to 12 million


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non-par value bearer ordinary shares with a nominal value

of € 1.00, each of which can be exercised to obtain one

ordinary share.

Members of the Management Board of FMC Manage-

ment AG, members of the management boards of FMC-AG &

Co. KGaA’s affiliated companies and the managerial staff

members of FMC-AG & Co. KGaA and of certain affiliated com-

panies are entitled to participate in the 2011 Incentive Pro-

gram. With respect to participants who are members of FMC

Management AG’s Management Board, FMC Management

AG’s Supervisory Board has sole authority to make plan inter-

pretations, decide on certain adjustments and to grant awards

under the 2011 Incentive Program. FMC Management AG

has such authority with respect to all other participants in the

2011 Incentive Program.

The exercise price of stock options granted under the 2011

Incentive Program shall be the average stock exchange price

on the Frankfurt Stock Exchange of FMC-AG & Co. KGaA’s

ordi nary shares during the 30 calendar days immediately prior

to each grant date. Stock options granted under the 2011

Incentive Program have an eight-year term and can be exer-

cised only after a four-year vesting period. Stock options

granted under the 2011 Incentive Program to U.S. participants

are non-qualified stock options under the United States Inter-

nal Revenue Code of 1986, as amended. Options under the

2011 Incentive Program are not transferable by a participant

or a participant’s heirs, and may not be pledged, assigned,

or disposed of otherwise.

Phantom stock under the 2011 Incentive Program entitles

the holders to receive payment in euro from FMC-AG & Co.

KGaA upon exercise of the phantom stock. The payment per

phantom share in lieu of the issuance of such stock shall be

based upon the closing stock exchange price on the Frankfurt

Stock Exchange of one of FMC-AG & Co. KGaA’s ordinary

shares on the exercise date. Phantom stock will have a five-

year term and can be exercised only after a four-year vesting

period, beginning with the grant date, however a shorter

period may apply for certain exceptions. For participants who

are U.S. tax payers, the phantom stock is deemed to be exer-

cised in any event in the month of March following the end of

the vesting period.

stock Option plan 2006The Fresenius Medical Care AG & Co. KGaA Stock Option Plan

2006 (Amended 2006 Plan) was established with a condi-

tional capital increase up to € 12.8 million subject to the issue

of up to 5 million non-par value bearer ordinary shares with

a nominal value of € 1.00, each of which can be exercised to

obtain one ordinary share. In connection with the share split

affected in 2007, the principal amount was adjusted to the

same proportion as the share capital out of the capital increase

up to € 15 million by the issue of up to 15 million new non-

par value bearer ordinary shares.

After December 2010, no further grants were issued

under the Amended 2006 Plan. Options granted under this

plan are exercisable through December 2017.

Options granted under the Amended 2006 Plan to U.S. par-

ticipants are non-qualified stock options under the United

States Internal Revenue Code of 1986, as amended. Options

under the Amended 2006 Plan are not transferable by a par-

ticipant or a participant’s heirs, and may not be pledged,

assigned, or otherwise disposed of.

2001 international stock Option planUnder the Fresenius Medical Care 2001 International Stock

Incentive Plan (2001 Plan), options in the form of convertible

bonds with a principal of up to € 10.24 million were issued

to the members of the Management Board and other employ-

ees of FMC-AG & Co. KGaA representing grants for up to 4 mil-

lion non-voting preference shares. The convertible bonds

originally had a par value of € 2.56 and bear interest at a rate

of 5.5%. In connection with the share split affected in 2007,

the principal amount was adjusted in the same proportion as

the share capital out of the capital increase and the par

value of the convertible bonds was adjusted to € 0.85 without

affecting the interest rate.


Financial S

tatements

Based on the resolution of the Annual General Meeting and

the separate Meeting of the Preference Shareholders on

May 16, 2013 regarding the conversion of all bearer prefer-

ence shares into bearer ordinary shares, the 2001 Plan

was amended accordingly. The partial amount of the capital

increase which was formerly referred to as the issuance

of bearer preference shares will now be referred exclusively

to the issuance of bearer ordinary shares.

Effective May 2006, no further grants can be issued under

the 2001 Plan and no options were granted under this plan

after 2005. The outstanding options will expire before 2016.

transactions during 2014During 2014, FMC-AG & Co. KGaA awarded 1,677,360 options

under the 2011 Incentive Program, including 273,900 stock

options granted to members of the Management Board of

FMC Management AG, at a weighted-average exercise price

of € 50.35, a weighted-average fair value of € 9.13 each and

a total fair value of € 15 million, which will be amortized over

the four-year vesting period. FMC-AG & Co. KGaA awarded

299,547 phantom stocks, including 24,950 phantom stocks

granted to members of the Management Board of FMC Man-

agement AG, at a measurement date (December 31, 2014)

The table below provides reconciliations for options outstanding at December 31, 2014 as compared to December 31, 2013:

Number of options in thousands


in €

balance at december 31, 2013 (options for ordinary shares) 10,791 45.83

Granted 1,677 50.35

Exercised 2,109 35.17

Forfeited 1,170 51.81

balance at december 31, 2014 (options for ordinary shares) 9,189 48.34

The following table provides a summary of fully vested options for ordinary shares outstanding and exercisable

at December 31, 2014:

Number of options

in thousands




in €

Aggregate intrinsic value

€ in millions

Options for ordinary shares 2,539 1.84 37.38 62

weighted-average fair value of € 58.17 each and a total fair

value of € 17 million, which will be revalued if the fair value

changes, and amortized over the four-year vesting period.

During 2014, FMC-AG & Co. KGaA received cash of € 74 mil-

lion from the exercise of stock options. The intrinsic value

of convertible bonds and stock options exercised in 2014 was

€ 36 million. FMC-AG & Co. KGaA recorded a related tax ben-

efit of € 6 million for 2014. In connection with cash-settled

share-based payment trans actions under the 2011 Incentive

Plan, FMC-AG & Co. KGaA recognized expenses of € 4 million

and € 3 million for the years ending December 31, 2014 and

2013, respectively.

At December 31, 2014, the Management Board mem-

bers of FMC Management AG held 1,485,076 stock options

and employees of FMC-AG & Co. KGaA held 7,704,555 stock

options under the various stock-based compensation plans of

Fresenius Medical Care.

At December 31, 2014, the Management Board members

of FMC Management AG held 66,960 phantom stocks and

employees of FMC-AG & Co. KGaA held 666,038 phantom

stocks under the 2011 Incentive Program.


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At December 31, 2014, total unrecognized compensation

cost related to non-vested options granted under all plans was

€ 24 million. This cost is expected to be recognized over a

weighted-average period of 1.95 years.

34. related party transaCtiOnsProf. Dr. med. D. Michael Albrecht, a member of the Super-

visory Board of Fresenius SE & Co. KGaA, is medical director

and spokesman of the management board of the University

Hospital Carl Gustav Carus Dresden and a member of the

supervisory board of the University Hospital Aachen. Further-

more, he was a member of the supervisory board of the

University Hospital Magdeburg until October 3, 2013 and a

member of the supervisory board of the University Hospital

Rostock until February 28, 2013. The Fresenius Group main-

tains business relations with these hospitals in the ordinary

course and under customary conditions.

Prof. Dr. h. c. Roland Berger, a member of the Supervisory

Board of Fresenius Management SE and of Fresenius SE &

Co. KGaA, is a partner of Roland Berger Strategy Consultants

Holding GmbH. In 2014, after discussion and approval by

the Supervisory Board of Fresenius Management SE and

Fresenius SE & Co. KGaA, the Fresenius Group paid € 3.1 mil-

lion to affiliated companies of the Roland Berger group for

consulting serv ices rendered (2013: € 2.9 million).

Klaus-Peter Müller, a member of the Supervisory Board

of Fresenius Management SE and of Fresenius SE & Co. KGaA,

is the chairman of the supervisory board of Commerzbank

AG. The Fresenius Group maintains business relations with

Commerzbank under customary conditions. In 2014, the

Fresenius Group paid in aggregate € 1.1 million to Commerz-

bank for financing commitments, in connection with Senior

Notes issuances and a capital increase from company’s funds

(stock split) (2013: € 1.4 million).

Dr. Gerhard Rupprecht, who died in an accident in August

2014, was a member of the Supervisory Boards of Fresenius

Management SE and of Fresenius SE & Co. KGaA as well as of

the administrative board of Allianz France SA. In 2014, the

Fresenius Group paid € 11.6 million (2013: € 5.3 million) for

insurance premiums to the Allianz group under customary

conditions.

Dr. Dieter Schenk, deputy chairman of the Supervisory

Board of Fresenius Management SE, is a partner in the inter-

national law firm Noerr LLP, which provides legal serv ices

to the Fresenius Group. In 2014, after discussion and approval

of each mandate by the Supervisory Board of Fresenius Man-

agement SE, the Fresenius Group paid or processed for pay-

ment in December 2014 about € 1.8 million to this law firm

for legal services rendered (2013: € 1.5 million). Not included

in the amount paid or processed for payment are such pay-

ments made in the fiscal year 2014 that had already been pro-

cessed for payment in 2013 and have therefore already been

reported for the fiscal year 2013.

In 2014, € 11 million (2013: € 9 million) were paid to

Fresenius Management SE as compensation for the Manage-

ment Board and the Supervisory Board, general partners’

fees and other reimbursements of out-of pocket expenses. At

December 31, 2014, there were outstanding liabilities pay-

able to Fresenius Management SE in the amount of € 22 mil-

lion (December 31, 2013: € 21 million), consisting mainly of

pension obligations.

The payments mentioned in this note are net amounts. In

addition, VAT and insurance tax were paid.

35. subseQuent eVentsFresenius announced on January 12, 2015, that its pharma-

ceutical manufacturing facility in Grand Island, N.y., has

achieved the upgraded status of “voluntary action indicated”

(VAI) following an October 2014 inspection. The status

change is an improvement from the “official action indicated”

status the facility had been operating under. The new VAI

classification permits FDA approval of new Fresenius Kabi

products at the plant.

On February 12, 2015, Fresenius SE & Co. KGaA refinanced

the revolving credit facilities and the term loan A tranches

under the 2013 Senior Credit Agreement in a total amount of

€ 3,044 million. The maturity was extended by two years

to June 28, 2020.

On February 16, 2015, Fresenius Kabi has sold its German

subsidiary CFL GmbH to NewCo Pharma GmbH. Fresenius

Kabi will remain active in compounding. In Germany, the focus

will be on parenteral nutrition products. In 2014, CFL GmbH

had sales of € 77 million.

There have been no significant changes in the Fresenius

Group’s operating environment following the end of the fiscal

year 2014 until February 24, 2015. No other events of mate-

rial importance on the assets and liabilities, financial position,

and results of operations of the Group have occurred follow-

ing the end of the fiscal year.


Financial S

tatements

nOtes in aCCOrdanCe With the

german COmmerCial COde (hgb)

36. COmpensatiOn OF the management bOard and the superVisOry bOardIndividualized information regarding the compensation of the

members of the Management Board and of the Supervisory

Board is disclosed in the audited Compensation Report (see

page 23 ff.), which is part of the Management Report.

The compensation of the Management Board is, as a whole,

performance-based and was composed of three elements in

the fiscal year 2014:

▶ non-performance-based compensation (fixed compensa-

tion and fringe benefits)

▶ short-term performance-based compensation (one-year


▶ components with long-term incentive effects (several-year

variable compensation comprising stock options, share-

based compensation with cash settlement (phantom stocks)

and postponed payments of the one-year variable com-

pensation)

The cash compensation paid to the Management Board for

the performance of its responsibilities was € 11,462 thousand

(2013: € 11,044 thousand). Thereof, € 5,016 thousand (2013:

€ 5,044 thousand) is not performance-based and € 6,446 thou-

sand (2013: € 6,000 thousand) is performance-based. The

amount of the performance-based compensation depends on

the achievement of targets relating to the net income of the

Fresenius Group and business segments. As a long-term incen-

tive component, the members of the Management Board

received 315,000 stock options under the Fresenius SE & Co.

KGaA Stock Option Plan 2013 and 74,700 stock options

under the Fresenius Medical Care AG & Co. KGaA Stock Option

Plan 2011 and a share-based compensation with cash set-

tlement in an amount of € 3,743 thousand.

The payment of a part of the performance-based compen-

sation in an amount of € 271 thousand was postponed by

two years as a long-term incentive component. The payment

depends on the achievement of targets relating to the net

income attributable to shareholders of Fresenius SE & Co. KGaA

of the years 2015 and 2016. The total compensation of the

Management Board was € 18,759 thousand (2013: € 18,407

thousand).

The total compensation paid to the Supervisory Boards

of Fresenius SE & Co. KGaA and Fresenius Management SE

and their committees was € 2,961 thousand in 2014 (2013:

€ 2,920 thousand). Of this amount, € 206 thousand was fixed

compensation (2013: € 213 thousand), € 100 thousand was

compensation for committees services (2013: € 100 thousand),

and € 2,655 thousand was variable compensation (2013:

€ 2,607 thousand).

In 2014, based on pension commitments to former mem-

bers of the Management Board, € 1,049 thousand (2013:

€ 1,064 thousand) was paid. The pension obligation for these

persons amounted to € 18,465 thousand in 2014 (2013:

€ 17,389 thousand).

In the fiscal years 2014 and 2013, no loans or advance

payments of future compensation components were made

to members of the Management Board of Fresenius Manage-

ment SE.

181

Fin

anci

al S

tate

men

ts

Consolidated Financial statements Notes in accordance with the German Commercial Code (HGB)

37. auditOr’s FeesIn 2014 and 2013, fees for the auditor KPMG AG Wirtschafts prüfungsgesellschaft were expensed as follows:

2014 2013

€ in millions total germany Total Germany

Audit fees 16 6 15 5

Audit-related fees 1 1 2 1

Tax consulting fees 1 0 1 –

Other fees 6 6 4 4

total auditor’s fees 24 13 22 10

The leading auditor has been responsible for the audit of the

consolidated financial statements since 2012.

38. COrpOrate gOVernanCeFor each consolidated stock exchange listed entity, the decla-

ration pursuant to Section 161 of the German Stock Corpo-

ration Act (Aktiengesetz) has been issued and made available

to shareholders on the website of Fresenius SE & Co. KGaA

(www.fresenius.com), and of Fresenius Medical Care AG & Co.

KGaA (www.freseniusmedicalcare.com).

39. prOpOsal FOr the distributiOn OF earningsThe general partner and the Supervisory Board of Fresenius

SE & Co. KGaA propose to the Annual General Meeting that

the earnings for 2014 of Fresenius SE & Co. KGaA are distrib-

uted as follows:

in €

Payment of a dividend of € 0.44 per bearer ordinary share on the 541,532,600 ordinary shares entitled to dividend 238,274,344.00

Balance to be carried forward 942,025.95

retained earnings 239,216,369.95


Financial S

tatements

Bad Homburg v. d. H., February 24, 2015

Fresenius SE & Co. KGaA,

represented by:

Fresenius Management SE, its general partner

The Management Board

Dr. U. M. Schneider Dr. F. De Meo Dr. J. Götz

M. Henriksson R. Powell S. Sturm Dr. E. Wastler

40. respOnsibility statement“To the best of our knowledge, and in accordance with the

applicable reporting principles, the consolidated financial

statements give a true and fair view of the assets, liabilities,

financial position and profit or loss of the Group, and the

Group management report includes a fair review of the devel-

opment and performance of the business and the position of

the Group, together with a description of the principal oppor-

tunities and risks associated with the expected development

of the Group.”

183

Aud

itor

’s R

epor

t

auditor’s report

auditOr’s repOrt

To the Fresenius SE & Co. KGaA

We have audited the consolidated financial statements pre-

pared by the Fresenius SE & Co. KGaA, Bad Homburg v. d.

Höhe, comprising the consolidated statement of income, the

consolidated statement of comprehensive income, the consol-

idated statement of financial position, the consolidated state-

ment of cash flows, the consolidated statement of changes in

equity and the notes to the consolidated financial statements

for the business year from January 1 to December 31, 2014.

The preparation of the consolidated financial statements in

accord ance with Accounting Principles Generally Accepted in

the United States of America (U.S. GAAP) is the responsibility

of the legal representative of the Company. Our responsibility

is to express an opinion on the consolidated financial state-

ments based on our audit. In addition, we have been engaged

to express an opinion as to whether the voluntarily prepared

group management report is in agreement with the group man-

agement report of Fresenius SE & Co. KGaA, Bad Hom burg

v. d. Höhe, prepared in accordance with § 290 and § 315 HGB

[Handels gesetz buch “German Commercial Code”] apart from

appropriate incorporation of U.S. GAAP financial data.

We conducted our audit of the consolidated financial state-

ments in accordance with § 317 HGB and German generally

accepted standards for the audit of financial statements pro-

mulgated by the Institut der Wirtschaftsprüfer (IDW). Those

standards require that we plan and perform the audit such that

misstatements materially affecting the presentation of the

net assets, financial position and results of operations in the

consolidated financial statements in accordance with the

applicable financial reporting framework and in the group

management report are detected with reasonable assurance.

Knowledge of the business activities and the economic and

legal environment of the Group and expectations as to possi-

ble misstatements are taken into account in the determina-

tion of audit procedures. The effectiveness of the accounting-

related internal control system and the evidence supporting

the disclosures in the consolidated financial statements and

the group management report are examined primarily on a

test basis within the framework of the audit. The audit includes

assessing the annual financial statements of those entities

included in consolidation, the determination of entities to be

included in consolidation, the accounting and consolidation

principles used and significant estimates made by the legal

representative, as well as evaluating the overall presentation

of the consolidated financial statements. We believe that our

audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion, based on the findings of our audit, the con-

solidated financial statements comply with U.S. GAAP and

give a true and fair view of the net assets, financial position

and results of operations of the Group in accordance with

these requirements. The voluntarily prepared group manage-

ment report is consistent with the consolidated financial

statements prepared in accordance with U.S. GAAP and is,

apart from appropriate incorporation of U.S. GAAP financial

data, in agreement with the group management report of

Fresenius SE & Co. KGaA prepared in accordance with § 290

and § 315 HGB, on which we issued an unqualified statu-

tory audit opinion. Based on this, the group management

report as a whole provides a suitable view of the Group’s posi-

tion and suitably presents the opportunities and risks of

future development.

Frankfurt am Main, February 24, 2015

KPMG AG

Wirtschaftsprüfungsgesellschaft

Rohrbach Walter

German Public Auditor German Public Auditor

Report S

upervisory Board

Report Supervisory Board184

REPORT OF THE SUPERVISORY BOARDIn 2014, the Supervisory Board of Fresenius SE & Co. KGaA fulfilled its obligations in its respective terms in

accordance with the provisions of the law, the articles of association, and the rules of procedure. It regu-

larly advised the Management Board of the general partner, Fresenius Management SE, regarding the man-

agement of the Company, and has supervised the management in accordance with its Supervisory Board

responsibilities.

COOPERATION BETWEEN THE MANAGEMENT AND THE SUPERVISORY BOARDCarrying out its monitoring and advisory activities, the Management Board regularly kept the Supervisory

Board informed − in a timely and comprehensive oral and written manner − about all important matters relat-

ing to business policy, business development, profitability, the economic and financial position of the Com-

pany and the Group, the corporate strategy and planning, risk situation, risk management, and compliance,

as well as important business events. Based on the reports submitted from the Management Board of the

general partner, the Supervisory Board discussed all business transactions that were important for the Com-

pany in its committees and at its meetings. The Management Board of the general partner discussed the

Company’s strategic direction with the Supervisory Board. The Supervisory Board passed resolutions within

the framework of its legal and Company statutory authority.

The Supervisory Board of Fresenius SE & Co. KGaA convened for four regular meetings in 2014 – in

March, May, October, and December. In addition, the Supervisory Board had a conference call in January in

which the members of the Supervisory Board were informed about the divestment of two HELIOS hospitals

due to cartel in context of the acquisition of hospitals from Rhön-Klinikum AG. Before the meetings, the

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Report Supervisory Board 185

Management Board of the general partner sent detailed reports and comprehensive approval documents to

the members of the Supervisory Board. At the meetings, the Supervisory Board discussed in detail the busi-

ness development and any important corporate decisions based on the reports from the general partner’s

Management Board.

All matters requiring Supervisory Board approval were submitted with sufficient time for proper scrutiny.

After reviewing the related approval documents and detailed consultation with the Management Board of

the general partner, the Supervisory Board approved all matters submitted to it.

The Supervisory Board was also informed about any important business events occurring between meet-

ings. In a few cases, it passed resolutions by written proceeding in lieu of a meeting. In addition, the Chair-

man of the general partner’s Management Board regularly informed the Chairman of the Supervisory Board

in separate meetings about the latest development of the business and forthcoming decisions and discussed

them with him.

Every member of the Supervisory Board of Fresenius SE & Co. KGaA attended at least half of the regular

Supervisory Board Meetings in 2014.

MAIN FOCUS OF THE SUPERVISORY BOARD’S ACTIVITIESIn 2014, the Supervisory Board mostly focused its monitoring and consulting activities on business opera-

tions and investments by the business segments. Furthermore, the Supervisory Board thoroughly reviewed

and discussed all other significant business activities with the Management Board. The main consulting focus

was on the stock split and on acquisitions, especially at Fresenius Medical Care in the area of Care Coordi-

nation and at Fresenius Kabi regarding a planned joint venture in Russia, as well as the development and

integration of the hospitals acquired from Rhön-Klinikum AG. The Supervisory Board discussed in detail the

2015 budget and the mid-term planning of the Fresenius Group. It also focused on the strategies of the

business segments, especially on the business perspectives for Fresenius HELIOS. At its meetings and within

the Audit Committee, the Supervisory Board also kept itself regularly informed about the Group’s risk situa-

tion and risk management activities as well as compliance.

CORPORATE GOVERNANCEThe Supervisory Board and the Management Board of the general partner jointly issued a Declaration of Con-

formity in accordance with the German Corporate Governance Code pursuant to Section 161 of the German

Stock Corporation Act (AktG) on December 20, 2014.

Report S

upervisory Board


The Management Board of the general partner and the Supervisory Board of Fresenius SE & Co. KGaA have

a duty to act in the best interests of the Company. In performing their activities, they do not pursue personal

interests or bestow unjustified benefits on others. Any sideline activities or transactions with the Company

by members of the corporate bodies must be reported to, and approved by, the Supervisory Board.

Prof. Dr. med. D. Michael Albrecht is a member of the Supervisory Board of our Company and is medical

director and spokesman for the management board of the University Hospital Carl Gustav Carus Dresden as

well as a member of the supervisory board of the University Hospital in Aachen. The Fresenius Group main-

tains regular business relationships with these hospitals in the ordinary course under customary conditions.

Klaus-Peter Müller is a member of the Supervisory Boards of our Company and of Fresenius Management SE,

as well as chairman of the supervisory board of Commerzbank AG, with which the Fresenius Group main-

tains business relationships under customary conditions. In 2014, the Fresenius Group paid € 1.1 million to

Commerzbank AG for capital market financing and for carrying out the share split. Until his death on August 8,

2014, Dr. Gerhard Rupprecht was a member of the Supervisory Board of our Company and of Fresenius

Management SE, as well as a member of the supervisory board of Allianz France SA. In 2014, the Fresenius

Group paid € 11.6 million for insurance premiums to Allianz under customary conditions.

There are no direct consultancy or other service relationships between the Company and any given mem-

ber of the Supervisory Board. In 2014, the Fresenius Group had consultancy contracts with the management

consultancy firm Roland Berger Strategy Consultants GmbH, an affiliated company of the management con-

sultancy firm Roland Berger Strategy Consultants Holding GmbH. Prof. Dr. h. c. Roland Berger is a member of

the Supervisory Board of Fresenius Management SE and a member of the Supervisory Board of our Com-

pany. Prof. Dr. h. c. Berger is, at the same time, a partner in Roland Berger Strategy Consultants Holding GmbH.

The Fresenius Group paid approximately € 3.1 million (2013: € 2.9 million) to companies of the Roland Berger

Group associated with this company. The Supervisory Board closely examined this mandate and approved

it in the fiscal year 2013. Prof. Dr. h. c. Berger abstained from voting. The respective approval was made on

the basis of a written submission to the Supervisory Board and prior to the payment of the invoices for the

services. Work on this mandate given in the 2013 fiscal year continued in the fiscal year 2014.

Furthermore, various companies of the Fresenius Group were advised by affiliated companies of the inter-

nationally acting law firm Noerr. Dr. Dieter Schenk, member of the Supervisory Board of Fresenius Manage-

ment SE and Deputy Chairman of the same, is also a partner of the law firm Noerr LLP. In 2014, the Fresenius

Rep

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Group paid or processed for payment in December about € 1.8 million to the law firm Noerr (2013: € 1.5 mil-

lion). This corresponds to 1% of the total amount paid by the Fresenius Group for services and legal advice

in 2014 (2013: 1%). Not included in the amount paid or processed for payment are such payments made in

2014 that had already been processed for payment in 2013, and have therefore already been reported for the

2013 fiscal year. Of the total amount for the 2014 fiscal year, about € 0.7 million was attributable to services

for Group companies not related to the business segment Fresenius Medical Care. The services rendered for

Group companies of the business segment Fresenius Medical Care require separate approval by the Super-

visory Boards of Fresenius Medical Care Management AG and Fresenius Medical Care AG & Co. KGaA. The

Supervisory Board of Fresenius Management SE, of which Dr. Schenk is a member, closely examined this man-

date and approved it. Dr. Schenk abstained from voting. The Supervisory Board of Fresenius SE & Co. KGaA,

of which Dr. Schenk is not a member, dealt with the amounts for legal services paid to the law firm Noerr in

relation to the amounts paid to other law firms.

The payments mentioned in this section are net amounts in euros. VAT was paid also.

For more information on corporate governance at Fresenius, please refer to the Corporate Governance

Declaration and Report on pages 11 to 35 of the Annual Report. Fresenius has disclosed the information on

related parties in its quarterly reports and on page 179 of the Annual Report.

WORK OF THE COMMITTEESThe Audit Committee held three meetings and four conference calls in 2014. The main focus of its monitoring

activities was on the preliminary audit of the annual financial statements of Fresenius SE & Co. KGaA and the

Group for 2012 and discussions with the auditors about their reports and the terms of reference of the audit.

Another matter dealt with by the Audit Committee was its recommendation to the Supervisory Board regarding

which auditing firm to propose to the Annual General Meeting for election as auditor for the annual financial

statements of Fresenius SE & Co. KGaA and the Group for 2014. The Supervisory Board’s proposal to the

Annual General Meeting in 2014 to elect KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, as auditor was

based on a recommendation to this effect by the Audit Committee. The Audit Committee also reviewed the

2014 quarterly reports, the controlling reports on the development of the acquisitions, the compliance, the risk

Report S

upervisory Board


management system, the internal control system, and the internal auditing system. The Chairman of the Audit

Committee reported regularly in the following Supervisory Board meetings on the work of the committee.

The Company’s Nomination Committee did not meet in 2014.

The Joint Committee, whose approval is necessary for certain important transactions of Fresenius SE & Co.

KGaA and for certain legal acts between the Company and the Else Kröner-Fresenius Foundation, did not

meet in 2014 because no transactions were effected that required the Joint Committee’s approval.

There is no Mediation Committee because the Supervisory Board of Fresenius SE & Co. KGaA does not

appoint the Management Board members of Fresenius Management SE.

For more information about the committees, their composition, and their work methods, please refer to

the Corporate Governance Declaration and Report on pages 15, 16, and 191 of the Annual Report.

PERSONNELDr. Gerhard Rupprecht, a member of the Supervisory Board of Fresenius SE & Co. KGaA was killed in an acci-

dent on August 8, 2014. Dr. Rupprecht joined the Supervisory Board of the now Fresenius SE & Co. KGaA in

October 2004, and as Deputy Chairman since March 2011 made important contributions to the Company’s

successful development. We will retain respectful memories of Dr. Rupprecht.

The Supervisory Board of Fresenius SE & Co. KGaA will propose that the next Annual General Meeting

elect Mr. Michael Diekmann, who will serve as Chief Executive Officer of Allianz SE until May 2015, to the

Supervisory Board.

In 2014, there were no changes in the composition of the Management Board of the general partner

Fresenius Management SE.

FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTSThe accounting records, the financial statements prepared according to the German Commercial Code (HGB),

and the 2014 Management Report of the Company were audited by KPMG AG Wirtschaftsprüfungsgesell-

schaft, Berlin. The firm was elected as auditor in accordance with the resolution passed at the Annual General

Meeting of Fresenius SE & Co. KGaA on May 16, 2014, and was subsequently commissioned by the Super-

visory Board. The auditors of KPMG issued their unqualified audit opinion for these statements. The same

applies to the Company’s consolidated financial statements, prepared according to IFRS accounting princi-

ples, and to the regulations that govern these statements pursuant to Section 315a of the German Commercial

Code (HGB). It also applies to the Company’s consolidated financial statements, which are prepared voluntarily

according to U.S. GAAP.

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The financial statements, the consolidated financial statements, the Management Reports, and the auditor’s

reports were submitted to each member of the Company’s Supervisory Board within the required time. At

their meetings on March 12 and 13, 2015, the Audit Committee and then the Supervisory Board discussed

all the documents in detail.

The auditors delivered a detailed report on the results of the audit at each of these meetings. They found

no weaknesses in the risk management system and the internal control system with regard to the accounting

process. The auditors attended all meetings of the Supervisory Board and all meetings and conference calls

of the Audit Committee.

The Audit Committee and the Supervisory Board approved the auditor’s findings. Also the Audit Com-

mittee’s and the Supervisory Board’s own review found no objections to the Company’s financial statements

and Management Report or the consolidated financial statements and the Group Management Reports.

At its meeting on March 13, 2015, the Supervisory Board approved the financial statements and Manage-

ment Reports presented by the general partner and the statements contained therein with respect to future

development.

The Supervisory Board concurs with the general partner’s proposal on the allocation of the 2014 dis-

tributable profit.

The Supervisory Board would like to thank the members of the Management Board of the general partner

and all employees for their outstanding achievements.

Bad Homburg v. d. H., March 13, 2015

The Supervisory Board

Dr. Gerd Krick

Chairman

Boards

Boards190

SUPERVISORY BOARD FRESENIUS SE & CO. KGAA

Dr. Gerd Krick

Former Chairman of Fresenius AG

Chairman

OfficesSupervisory BoardFresenius Management SE (Chairman)Fresenius Medical Care AG & Co. KGaA (Chairman)Fresenius Medical Care Management AGVAMED AG, Austria (Chairman)

Prof. Dr. med. D. Michael Albrecht

Medical Director and Spokesman of the

Management Board of the Universitäts-

klinikum Carl Gustav Carus Dresden

OfficesSupervisory BoardGÖK Consulting AGUniversitätsklinikum Aachen

Prof. Dr. h. c. Roland Berger

Management Consultant

OfficesSupervisory BoardFresenius Management SEPrime Office REIT-AG (until January 22, 2014, Chairman)Prime Office AG (since January 22, 2014 until May 5, 2014) Schuler AGDeutsche Oppenheim Family Office AG (former: Wilhelm von Finck AG (Deputy Chairman)WMP EuroCom AG (Chairman)Rocket Internet AG (since September 1, 2014)

Administrative BoardWittelsbacher Ausgleichsfonds (until September 30, 2014)

Board of DirectorsGeox S.p.A., ItalyRCS Mediagroup S.p.A., Italy (Vice President)

Dario Anselmo Ilossi

Trade Union Officer FEMCA Cisl –

Energy, Fashion, and Chemicals

Konrad Kölbl

Full-time Works Council Member

Member of the Manual Workers’ Works

Council of VAMED-KMB Krankenhaus-

management und Betriebsführungs-

ges. m.b.H.

Chairman of the Group Works Council

of VAMED AG

Deputy Chairman of the European Works

Council of Fresenius SE & Co. KGaA

Corporate OfficesSupervisory BoardVAMED-KMB Krankenhausmanagement und Betriebsführungsges. m.b.H., Austria

Klaus-Peter Müller

Chairman of the Supervisory Board of

Commerzbank AG

OfficesSupervisory BoardCommerzbank AG (Chairman)Fresenius Management SE Linde AG

Administrative BoardLandwirtschaftliche Rentenbank (until July 3, 2014)

Board of DirectorsParker Hannifin Corporation, USA

Dieter Reuß


Chairman of the Joint Works Council

of Fresenius SE & Co. KGaA /

Bad Homburg site

Deputy Chairman of the General Works


(since May 14, 2014)

Gerhard Roggemann

Canaccord Genuity Ltd., London (for-

merly: Hawkpoint Partners Ltd., London)

Vice Chairman Investment Banking

(until August 31, 2014)

Edmond de Rothschild Private

Merchant Banking LLP, London

Senior Advisor and Advisory Counsel to

the Frankfurt branch (since September 1,

2014)

OfficesSupervisory BoardDeutsche Beteiligungs AG (Deputy Chairman)Deutsche Börse AG (Deputy Chairman)GP Günter Papenburg AG (Chairman)WAVE Management AG (Deputy Chairman)

Dr. Gerhard Rupprecht

(† August 8, 2014)

Former member of the Management

Board of Allianz SE

Deputy Chairman

OfficesSupervisory BoardEuler Hermes Deutschland AGFresenius Management SE

Administrative BoardAllianz France SA

BOARDS

Boa

rds

Boards 191

SUPERVISORY BOARD FRESENIUS SE & CO. KGAA

Stefan Schubert

Hospital nurse and full-time Works

Council Member

Chairman of the Works Council of

HELIOS Klinik Bad Schwalbach and of

HELIOS Klinik Idstein


of Wittgensteiner Kliniken GmbH

Member of the European Works Council

of Fresenius SE & Co. KGaA

Corporate OfficesSupervisory BoardWittgensteiner Kliniken GmbH

Rainer Stein



of HELIOS Kliniken GmbH

Chairman of the European Works


Corporate OfficesSupervisory BoardHELIOS Kliniken GmbH

Niko Stumpfögger

Secretary of the Trade Union ver.di,

Head of Company and Industry Politics

in Health Care and Social Affairs

Deputy Chairman

OfficesSupervisory BoardHELIOS Kliniken GmbH (Deputy Chairman)

Audit Committee


(Chairman)

Konrad Kölbl

Dr. Gerd Krick

Gerhard Roggemann

Rainer Stein

Nomination Committee

Dr. Gerd Krick (Chairman)



(† August 8, 2014)

Joint Committee 1

Dr. Dieter Schenk (Chairman)

Dr. Gerd Krick


(† August 8, 2014)

Dr. Karl Schneider

COMMITTEES OF THE SUPERVISORY BOARD

1 The committee consists equally of two members each of the Supervisory Board of Fresenius SE & Co. KGaA and of Fresenius Management SE.

Boards

Boards192

Dr. Ulf M. Schneider

Chairman

Corporate OfficesSupervisory BoardFPS Beteiligungs AG (Chairman)Fresenius Kabi AG (Chairman)Fresenius Kabi España S.A.U., SpainFresenius Medical Care Groupe France S.A.S., France (Chairman)Fresenius Medical Care Management AG (Chairman)HELIOS Kliniken GmbH (Chairman)

Board of DirectorsFresenius Kabi USA, Inc., USA FHC (Holdings) Ltd., Great Britain

OfficesBoard of DirectorsE. I. Du Pont de Nemours and Company, USA(since October 22, 2014)

Dr. Francesco De Meo

Business Segment Fresenius Helios

Corporate OfficesSupervisory BoardHELIOS Beteiligungs AG (Chairman)HELIOS Kliniken Schwerin GmbH (Chairman)

Dr. Jürgen Götz

Chief Legal and Compliance Officer,

and Labor Relations Director

Corporate OfficesSupervisory BoardFPS Beteiligungs AG (Deputy Chairman)HELIOS Kliniken GmbH Wittgensteiner Kliniken GmbH (Chairman)

Mats Henriksson

Business Segment Fresenius Kabi

Corporate OfficesSupervisory BoardFresenius Kabi Austria GmbH, Austria (Chairman)Fresenius Kabi España S.A.U., Spain Fresenius Kabi Japan K.K., JapanLabesfal – Laboratórios Almiro, S.A., Portugal

Administrative BoardFresenius Kabi Groupe France S.A., France (Chairman)Fresenius Kabi Italia S.p.A., Italy (Chairman)

Board of DirectorsFenwal, Inc., USAFenwal Canada Holdings, Inc., USAFenwal Holdings, Inc., USAFHC (Holdings) Ltd., Great Britain Fresenius Kabi Asia Pacific Ltd., Hong Kong Fresenius Kabi Oncology Ltd., India Fresenius Kabi Pharmaceuticals Holding, Inc., USA Fresenius Kabi (Singapore) Pte Ltd., Singapore Fresenius Kabi USA, Inc., USA Sino-Swed Pharmaceutical Corp, Ltd., China

Rice Powell

Business Segment


Corporate OfficesManagement BoardFresenius Medical Care Management AG (Chairman)

Administrative BoardVifor Fresenius Medical Care Renal Pharma Ltd., Switzerland (Deputy Chairman)

Board of DirectorsFresenius Medical Care Holdings, Inc., USA (Chairman)

Stephan Sturm

Chief Financial Officer

Corporate Offices Supervisory BoardFPS Beteiligungs AGFresenius Kabi AG (Deputy Chairman)Fresenius Kabi España S.A.U., SpainHELIOS Kliniken GmbHLabesfal – Laboratórios Almiro, S.A., PortugalVAMED AG, Austria (Deputy Chairman)Wittgensteiner Kliniken GmbH

Administrative BoardFresenius Kabi Groupe France S.A., France

Board of DirectorsFHC (Holdings) Ltd., Great Britain

Dr. Ernst Wastler

Business Segment Fresenius Vamed

Corporate OfficesSupervisory BoardCharité CFM Facility Management GmbH (Deputy Chairman)VAMED-KMB Krankenhausmanagement und Betriebsführungsges. m.b.H., Austria (Chairman)

MANAGEMENT BOARD FRESENIUS MANAGEMENT SE(General partner of Fresenius SE & Co. KGaA)

Boa

rds

Boards 193

Dr. Gerd Krick

Chairman


Klaus-Peter Müller


(† August 8, 2014)

Dr. Dieter Schenk

Lawyer and Tax Consultant

Deputy Chairman

OfficesSupervisory BoardFresenius Medical Care AG & Co. KGaA (Deputy Chairman)Fresenius Medical Care Management AG (Deputy Chairman)Gabor Shoes AG (Chairman)Greiffenberger AG (Deputy Chairman)TOPTICA Photonics AG (Chairman)

Administrative BoardElse Kröner-Fresenius-Stiftung (Chairman)

Dr. Karl Schneider

Former Spokesman of Südzucker AG

OfficesAdministrative BoardElse Kröner-Fresenius-Stiftung (Deputy Chairman)

SUPERVISORY BOARD FRESENIUS MANAGEMENT SE(General partner of Fresenius SE & Co. KGaA)

194 Glossary

Glossary

Health care terms / Products and services

Administrative data Data transmitted to sickness funds as part of the billing process or to federal agencies like the German Federal Statistical Office due to legal requirements. In Germany, this includes information about coded diagnoses and pro-cedures.

AlbuminProtein that is indicative of a patient’s general nutritional status.

Blood volume substitutesThey are used for the temporary stabilization and / or maintenance of blood volume, for exam-ple, in the event of major blood loss.

DialysisForm of renal replacement therapy where a semipermeable membrane – in peritoneal dial-ysis the peritoneum of the patient, in hemo-dialysis the membrane of the dialyzer – is used to clean a patient’s blood.

Dialysis machineThe hemodialysis process is controlled by a dial-ysis machine, which pumps blood, adds anti-coagulants, regulates the cleansing process, and controls the mixture of dialysate and its flow rate through the system.

Dialysis solution / Dialysate Fluid used in the process of dialysis in order to remove the filtered out substances and excess water from the blood.

Dialyzer Special filter used in hemodialysis for removing toxic substances, waste products of metabolic processes, and excess water from the blood. The dialyzer is sometimes referred to as the “artifi-cial kidney.”

Enteral nutrition Application of liquid nutrition as a tube or sip feed via the gastrointestinal tract.

EPO (Erythropoietin) Hormone that stimulates red blood cell produc-tion. Recombinant (i. e., artificially produced) human EPO is commonly prescribed to patients on dialysis who suffer from anemia.

FDA (U.S. Food & Drug Administration)Official authority for food observation and drug registration in the United States.

HD (Hemodialysis) A treatment method for dialysis patients where the blood of the patient is cleansed by a dia-lyzer. The solute exchange between blood and dialysate is dominated by diffusive processes.

HemoglobinComponent of red blood cells that transports oxygen around the body. An insufficient level of hemoglobin is indicative of anemia, which typically occurs in patients with chronic kidney failure. Besides dialysis, anemia is treated with iron supplements and the hormone compound erythropoietin (EPO).

GLOSSARy

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Glossary

Health care terms / Products and services

Kt / V value Provides information on urea content in the blood. Urea is mostly excreted by healthy kid-neys, but for dialysis patients it must be filtered from the blood through renal replacement ther-apy. The Kt / V value shows whether a patient was detoxified effectively during dialysis.

Medicare / MedicaidA program developed by the federal U.S. Social Security Administration that reimburses health insurance companies and providers of medi-cal services for medical care to individuals over 65, people with chronic kidney failure, or the disabled.

Outpatient facility Interdisciplinary facility for outpatient care, managed by a physician. Potential shareholders of the medical care center include all service providers (such as physicians, pharmacists, health care facilities), which are authorized to treat patients with statutory health insurance.

Parenteral nutrition Application of nutrients directly into the blood-stream of the patient (intravenously). This is necessary if the condition of a patient does not allow to absorb and metabolize essential nutri-ents orally or as sip and tube feed in a suffi-cient quantity.

PD (Peritoneal dialysis) Dialysis treatment method using the patient’s peritoneum as a filter to cleanse his blood.

PhosphatePhosphate concentrations show whether treat-ing the patient with dialysis and medication is sufficient for the body to absorb phosphate ingested with food. Healthy people excrete excess phosphate via the kidney, but a diseased kidney is unable to do this. If the phosphate concentrations in the blood are too high, this can lead to severe conditions.

Prevalence Number of all patients who suffer from a specific disease within a defined period. The prevalence rate indicates the number of people with this specific disease (e. g., terminal kidney failure) treated per million population.

PPP (public-private partnership model) Public-private partnership describes a govern-ment service or private business venture that is funded and operated through a partnership of government and one or more private-sector companies. PPP accompanies in most cases with a part-privatization of governmental services.

Three-chamber bag The three-chamber bag contains all the macro-nutrients like amino acids, glucose, and lipids, as well as electrolytes in three separate cham-bers. Immediately before infusion all nutrients are mixed thoroughly within the bag simply by opening individual chambers. This reduces the risk of contamination and saves time when preparing the infusions.

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Glossary

Glossary

Financial terms

ADR (American Depositary Receipt)Certificate that represents indirect ownership of shares in a non-U.S. company and enables trading in the United States.

Cash flow Financial key figure that shows the net balance of incoming and outgoing payments during a reporting period.

Commercial paper program Short-term unsecured promissory notes issued by corporations in need of short-term loans. Typically, commercial paper maturities range from a few days up to under two years.

Compliance Measures for adherence to laws and company policies.

Corporate Governance Designation in international parlance for com-pany management and company controlling focused on responsible, long-term value creation.

Days Sales Outstanding (DSO)

Indicates the average number of days it takes for a receivable to be paid. A shorter DSO results in less interest for the creditor and a lower risk of default.

EBIT

Earnings before interest and income taxes.

EBITDA

Earnings before interest, income taxes, depre-ciation, and amortization.

KGaA (Kommanditgesellschaft auf Aktien) A German legal form meaning partnership limited by shares. An entity with its own legal identity in which at least one general partner has full liability (personally liable shareholder, or Komplementär aktionär), while the other shareholders have an interest in the capital stock divided into shares without being person-ally liable for the debts of the company.

Organic sales growth Growth that is generated by a company’s existing businesses and not by acquisitions, divestitures, or foreign exchange impact.

OTC (Over-the-counter)Trading of securities that are not listed on a stock exchange in the respective country. Fresenius’ sponsored Level 1 ADRs are traded on the OTC market in the United States.

RatingA classification of the creditworthiness of a company accepted on the international capital market. It is published by independent rating agencies such as Standard & Poor’s, Moody’s, or Fitch based on a company analysis.

ROE (Return on Equity) Measure of a corporation’s profitability reveal-ing how much profit a company generates with the money shareholders have invested. ROE = fiscal year’s net income / total equity x 100.

ROIC (Return on Invested Capital) Calculated by: (EBIT – taxes) : Invested capitalInvested capital = total assets + amortization of goodwill (accumulated) – deferred tax assets – cash and cash equivalents – trade accounts pay-able – accruals (without pension accruals) – other liabilities not bearing interest. This key figure can be found on pages 50, 64, 75, and 81 of the Management Report.

ROOA (Return on Operating Assets) Calculated by: EBIT x 100 : operating assets (average) Operating assets = total assets – deferred tax assets – trade accounts payable – payments received on account – approved subsidies. This key figure can be found on pages 50, 64, 75, and 81 of the Management Report.

SE (Societas Europaea)Legal form of a European stock corporation. The supranational legal entity is based on European Community law. Subject to European regula-tions, the SE is treated in all member states of the European Union as a stock corporation according to the national law of the member state in which the SE is incorporated.

SOI (Scope of Inventory)

Indicates the average number of days between receiving goods as inventory and the sale of the finished product. Calculated by: (Inventories : Costs of goods sold) x 365 days.

Working Capital Current assets (including deferred assets) – accruals – trade accounts payable – other liabili-ties – deferred charges.

Xetra (Exchange Electronic Trading)Electronic trading system of Deutsche Börse AG to buy or sell stocks, foreign currencies, or other financial instruments.

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Index

AAccounting policies 102 ff.Acquisitions 36 f., 38 f., 40 f., 48 f., 72 f., 77, 114 ff.ADR Inside cover, 9, 196Analyst recommendation 10Annual General Meeting 11 f.Articles of association 11 ff., 47 f.Assets and liabilities 73 ff.Authorized capital 47, 148

BBoards 12 ff., 190 ff.Business development 62 ff.

CCapital 47 f.Cash and cash equivalents 95, 105, 122Cash flow 7, 72, 95, 196Cash flow statement 71 f., 95, 168 f.Clinical nutrition 38 f., 51, 60, 79Compensation of Management Board and Supervisory Board 23 ff., 34 f., 180Compliance 16 f., 87, 196Composition of the Group 102 f.Conditional capital 47 f., 148 f.Corporate governance 11 ff., 181, 185 ff., 196Corporate governance declaration 11 ff.Corporate performance criteria 49 f.Currency and interest risk management 75, 89 f., 161 ff.Currency translation 46, 89 f., 109 f.Current assets 74, 94, 123

DDeclaration of conformity 17 ff.Dialysis care 36 f., 59, 78 f.Dialysis products 36 f., 59, 78 f.Distribution of earnings 181Diversity 19 f., 52Dividend 9 f., 72, 82, 149

EEarnings per share 65 ff., 105, 121Employees 52 f., 82Employee participation 53Enteral nutrition 38 f., 51, 60, 194Environment 55 ff.Equity ratio 74, 168

FFinancial position 68 ff.Financing 69 ff., 81, 167 f.

GGroup structure 45, 101

HHealth care industry 58 ff.Hemodialysis 36, 50, 59, 194

IInfusion therapy 38 f., 51, 60, 79Inventories 106, 122Investments 41, 49, 72 f., 81Investor Relations 10IV drugs 38 f., 51, 60, 79

MManagement Board 2 ff., 12 ff., 192Market capitalization 9

NNet income 6, 65 ff., 80 f., 121Net interest 67, 119Noncontrolling interests 74, 94, 121, 145 f.Non-current assets 74, 94, 123

OOperating cash flow 7, 71 f.Opportunities management 83Outlook 76 ff., 80 f.

PParenteral nutrition 38 f., 51, 60, 195Pensions 94, 109, 139 ff.Peritoneal dialysis 36, 50, 59, 195Personnel expenses 52, 118Procurement 53, 82

QQuality management 54 ff.

RRating 75 f., 168, 196Renal pharmaceuticals 59, 78 f.Research and development 50 f., 82Results of operations 64 ff.Risk management / risk areas 17, 83 ff.ROE Inside cover, 196ROIC Inside cover, 50, 64, 75, 81, 196ROOA Inside cover, 50, 64, 75, 81, 170, 196

SSales 6, 64 f., 80 f., 118Segment reporting 98 f., 169 ff.Share Inside cover, 8 ff.Shareholder structure 10, 146 ff.Share price development 8 f.Stock option plan 22 ff., 53, 171 ff.Strategy 48 f.Subsequent events 76 Supervisory Board 12 ff., 46 f., 184 ff., 190 ff.Supervisory Board Committees 15 f., 47, 191Sustainability 55 ff.

TTransfusion technology 38 f., 51, 60, 79

VVocational training 53

WWorking capital 70 ff., 196

INDEx

198

Imprint

Imprint

Commercial Register: Bad Homburg v. d. H.; HRB 11852 Chairman of the Supervisory Board: Dr. Gerd Krick

General Partner: Fresenius Management SE

Registered Office and Commercial Register: Bad Homburg v. d. H.; HRB 11673 Management Board: Dr. Ulf M. Schneider (President and CEO), Dr. Francesco De Meo, Dr. Jürgen Götz, Mats Henriksson, Rice Powell, Stephan Sturm, Dr. Ernst WastlerChairman of the Supervisory Board: Dr. Gerd Krick

The German version of this Annual Report is legally binding.The editorial closing date of this Annual Report was on March 18, 2015, and it was published on March 19, 2015.

The Annual Report, the financial statements of Fresenius SE & Co. KGaA, and the consolidated statements in accordance with IFRS accounting principles are available on our website and may be obtained upon request under Investor Relations.

You will find further information and current news about our company on our website at: http: // www.fresenius.com.

Forward-looking statements:This Annual Report contains forward-looking statements. These statements represent assessments that we have made on the basis of the information available to us at the time. Should the assumptions on which the statements are based on not occur, or if risks should arise – as mentioned in the risk report and the SEC filings of Fresenius Medical Care AG & Co. KGaA – the actual results could differ materially from the results currently expected.

Design concept / realization: Hilger & Boie Design, WiesbadenPrint: Ziegler GmbH & Co. KG, Neckarbischofsheim, Germany

IMPRINT

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190 211 9,8 211


FRESENIUS HELIOS

FRESENIUS KABI

FRESENIUS VAMED

DIALYSIS PRODUCTS,


(DIALYSIS SERVICES


HOSPITAL OPERATION





FOR HOSPITALS AND




2014US$ in millions


2014€ in millions


Sales 15,832 14,610 8% 5,146 4,996 3%

EBIT 2,255 2,256 0% 873 1 926 1 - 6%

Net income 2 1,045 1,110 - 6% 468 1 487 1 - 4%



R & D expenses 122 126 - 3% 276 1 250 1 10%


2014€ in millions


2014€ in millions


Sales 5,244 3,393 55% 1,042 1,020 2%

EBIT 553 1 390 42% 59 55 7%

Net income 2 400 1 275 45% 41 37 11%





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€ in millions 2014 2013 2012 2011 2010

Sales and Earnings

Sales 23,231 20,331 19,290 16,361 1 15,972

EBITDA 2 4,095 3,888 3,851 3,237 3,057

EBIT 2 3,158 3,045 3,075 2,563 2,418







Total assets 39,897 32,758 30,664 26,321 23,577


Equity 5 15,483 13,260 12,758 10,577 8,844

Equity ratio 5 39% 41% 42% 40% 38%

Net debt 14,279 11,940 10,143 9,164 8,015

Net debt / EBITDA 6 3.41 2.51 2.56 2.83 2.62

Investments 7 3,795 3,827 4,179 2,395 1,402

Profitability

EBIT margin 2 13.6% 15.0% 15.9% 15.7% 15.1%














CONTACT

Ordinary share ADR



ISIN DE0005785604 ISIN US35804M1053








